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RBA announces cash rate decision

RBA announces cash rate decision

Miranda Brownlee
02 May 2017

The Reserve Bank of Australia has announced its decision on the official cash rate this month at its May board meeting.

As widely expected, the RBA kept the cash rate on hold today at 1.5 per cent.

CoreLogic head of research Tim Lawless said the housing market would have contributed to the RBA’s decision.

“Capital city dwelling values have increased by almost 10 per cent since the latest round of rate cuts in May and August last year, led by gains of around 13 per cent in Sydney and Melbourne,” Mr Lawless said.

Since the latest round of rate cuts, Mr Lawless said inflation has edged higher, with headline inflation moving back into the RBA’s target range of 2 per cent to 3 per cent for the first time since the September 2014 quarter.

“However, inflation increases were driven largely by forces that are exogenous to domestic demand, including a 6 per cent increase in the price of fuel and a 2.5 per cent administered increase in electricity prices,” he said.

“Coupled with continued low wage growth, this indicates that private and household demand may still be weak despite the higher inflation figures, warranting the maintenance of a low cash rate.”

ABC Bullion chief economist Jordan Eliseo said the RBA remains in no rush to cut interest rates despite the fact that most economic data have been soft and inflation remains under control.

“Financial stability concerns are still a factor, though we remain of the view that there is more downside to come for rates in the next 12 months,” Mr Eliseo said.

AMP chief economist Shane Oliver said worries about excessive home prices and debt growth prevent a cut, but “low underlying inflation and wages growth prevent a hike”.

RBA announces cash rate decision
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