RBA locks in first rates decision of the year
The Reserve Bank has just announced the outcome of its first board meeting for 2018, after keeping the cash rate at record lows last year.
As widely anticipated, the RBA has kept the cash rate on hold at 1.5 per cent for February.
“Despite the pick-up in both economic and employment growth during the second half of last year, there remains a considerable margin of 'spare capacity' in the labour market, and to a lesser extent in the economy more broadly, which together with global factors is keeping both wage and price inflation below where the RBA wants it to be,” said economist Saul Eslake.
“The recent strengthening in the A$ to above US80c, albeit largely on the back of a weaker US$, is another complication the RBA would rather not have,” he said.
Despite the “lower for longer” environment, CoreLogic’s head of research Tim Lawless believes the heat in the Australian residential property market is subsiding.
“Falling dwelling values are the result of tighter credit conditions rather than any changes in monetary policy settings. Despite the stable cash rate, investors have seen an average 40 basis points increase in their mortgage rates due to higher capital requirements from lenders, which has helped to slow investment demand and quell rapidly rising home values,” Mr Lawless said.
Mr Lawless foresees a cash rate hike by early next year.
“Interest rates won’t stay at their record lows forever. Financial markets have fully priced a 25 basis point rise by February next year.