RBA rate announcement

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

The official cash rate has been left at a record-low 2.5 per cent for the 14th consecutive month.

The decision comes as no surprise given the RBA announced last month that it expects to leave the official cash rate at 2.5 per cent for at least the next year.

In the minutes of the September board meeting, the Reserve Bank said, “Members concluded their discussion of financial markets by noting that market pricing was for the cash rate to be unchanged at the September meeting and for the next year at least.”

Financial Services Council chief economist James Bond said the Reserve Bank would wait to see how the Aussie dollar fares before making any adjustment to the cash rate.

“The RBA board will be pleased with the fall in the Australian dollar, and should the currency persist at a lower level, this will give the bank the capacity to raise rates earlier to take the heat out of the housing market,” he said.

ING Direct’s head of treasury, Michael Witts, said the Reserve Bank would be reluctant to increase the cash rate until the Australian dollar dropped well under US$0.90.

Meanwhile, all 28 economists surveyed by comparison website finder.com.au had forecast that the cash rate would remain on hold.

AMP Capital chief economist Shane Oliver told finder.com.au that the housing market was too strong for the official cash rate to be cut while the economy was too fragile for it to be raised.

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