The RBA today has decided to keep the official cash rate on hold this month after making cuts in both June and July.
The cash rate was cut by 25 basis points in June down to 1.25 per cent, and then by another 25 basis points last month to the new record low of 1.0 per cent.
St.George Bank senior economist Janu Chan said while the RBA has signalled that it is open to lowering interest rates if needed, there is less urgency in its language than previously.
“After the back-to-back rate cuts in June and July, the RBA is therefore likely to pause,” Ms Chan said.
“Nonetheless, the soft pace of growth in the economy and softening leading indicators on employment point to a risk that the unemployment rate will rise, suggesting the RBA will act and lower official interest rates further later this year.”
QIC chief economist Matthew Peter correctly predicted that after cutting rates in the last two months, the RBA would pause this month.
“However, governor Lowe has placed the RBA in a difficult position by emphasising the view that the unemployment rate must hit 4.5 per cent before sustained wage growth can be achieved. This sets up another RBA rate cut before year-end,” Mr Peter said.
AMP chief economist Shane Oliver agreed that the RBA is now in a “wait and see mode” following the cuts in June and July.
“The RBA is waiting to see the impact of the rate cuts in June and July and tax refunds for low and middle-income earners,” he said.
