The Reserve Bank of Australia announced on Tuesday that the Cash Rate Target will remain at 2.00%. This outcome was largely expected by economists.
The pertinent points in the RBA’s accompanying statement were:
- Cash Rate target unchanged at 2.0%
- AUD$ adjusting to lower commodity prices
- Monetary policy needs to be accommodative
- Economy likely to be operating with degree of spare capacity for some time
- Inflation seen remaining consistent with target over next one or two years
- Functioning of financial markets hasn’t been impaired by volatile equity markets
- Moderate expansion in Australia’s economy continues
The RBA has kept the cash rate on hold at 2 percent, an expected result of its first monthly board meeting since Turnbull came in as Australian Prime Minister. By leaving the cash rate at the record low rate of 2 percent, where is has been since May this year, it confirmed the 31 economists predictions that rates would remain on hold, surveyed by comparison website finder.com.au.
Current and ongoing concerns regarding China’s growth prospects and how that could then impact Australia’s own economy that is still running below trend with just 0.2 percent growth over the June quarter and 2 percent over the year, according to the ABS. These issues have led to numerous calls from economists for further interest rate cuts, with analysts from various institutions suggesting the cash rate will fall as low as 1.5% in 2016. Some say the first rate cut will come when the RBA meets next month on Melbourne Cup Day.
On the contrary, property prices are still surging in Australia’s two biggest cities, with Sydney prices growing 16.7 per cent and Melbourne prices growing 14.2 per cent during the year to September, according to RP Data.
Interest rates are set to remain low well into 2016. With the ASX200 closing the day in the green at 5167.40 points up. This is 71 points, 1.37 percent, higher than last months RBA announcement.