RBA announces cash rate decision
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”.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.