RBA Interest Rate Decision November 2016

November 1, 2016

 

The Reserve Bank of Australia has delivered the decision of its monthly board meeting.

 

The RBA, as widely anticipated, has today decided to hold the official cash rate at its record low of 1.50 per cent.

 

Of the 33 industry experts surveyed by mortgage comparison site finder.com.au, 30 (90 per cent) correctly predicted that there would be no change to the rate today.

 

Although below the RBA’s target range of 2 to 3 per cent, many experts believed that a modest lift in inflation last week (now at 1.3 per cent) and concerns about heated property markets in some capital cities stayed the RBA’s hand.

 

Paul Dales, chief Australia and New Zealand economist of Capital Economics commented: “The focus on the medium-term nature of the inflation target, concerns over housing and the recent rises in commodity prices mean the RBA is likely to put up with low underlying inflation and keep rates at 1.5 per cent for now.”

 

Heritage Bank’s treasurer Peter Haller agreed: “Q3 inflation data was not sufficiently weak to justify a further cash rate cut at this time.”

 

Grant Harrod, the chief executive officer of real estate network LJ Hooker, said the RBA’s decision is a positive for property affordability as it will likely moderate end of year price growth in Sydney and Melbourne’s heated markets.

 

“A cut would have heightened already strong levels of competition and potentially furthered affordability concerns, and that could have had a negative impact heading into the end of the year,” he commented.

 

Although the CPI results stayed the RBA’s hand today, Jordan Eliseo, chief economist at ABC Bullion, predicts that the RBA is likely to ease again with core inflation “still soft”, the AUD higher than it would like, and the employment picture “deteriorating”.

 

Robert Montgomery, chief economist at Infrastructure Partnerships Australia agreed: “Continued low inflation could put pressure on the RBA to make a further cut in 2017.”

 

Warm regards,

 

Wayne, Michael and the LadyBird team

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