RBA announces cash rate decision

The Reserve Bank of Australia has today announced the outcome of its monthly board meeting.

At 2.30pm today, the RBA announced the cash rate will stay on hold at 2.5 per cent.

RP Data research director Tim Lawless said this decision comes at a time when value growth across the housing market continues to trend higher, albeit at a lower rate than recent history.

“It is looking increasingly like the official cash rate will remain at its low setting, at least for the remainder of this year, which should continue to support housing demand,” Mr Lawless said.

“Capital gains over the past financial year were recorded at 10.1 per cent across the combined capital cities.

“However, we are expecting growth rates to wind down over the coming financial year as natural affordability constraints and low rental yields in the largest capital cities work to slow the rate of capital gains.”

Speaking to finder.com.au, AMP Capital’s chief economist Dr Shane Oliver said this “holding pattern” will remain for some time.

“The Reserve Bank has cut interest rates to record lows in response to the still unfolding mining investment slowdown to boost the rest of the economy, and there's tentative evidence that it's working, but it's still tentative,” Dr Oliver said.

“The most recent Budget has had a negative impact on confidence, and that's thrown a bit of a spanner in the works, and we've got relatively low inflation.

“So on the one hand the economy hasn't picked up enough to justify a rate hike, and inflation isn't a problem either; on the other hand the economy isn't collapsing– justifying rate cuts, so we're literally in a holding pattern.”

Dr Oliver added the next rate hike is likely to be late this year or early next year.

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