The Reserve Bank of Australia Board kept rates on hold at 2.25%.
What was behind their decision and when will rates rise?
Watch Martin Lakos, Division Director, Macquarie Private Wealth, discuss the RBA’s decision…
Here’s what he said:
The Reserve Bank Board met this week and kept official interest rates on hold at 2.25%.
Following last month’s rate cut, the first in 18 months, it would appear the RBA is assessing the overall impact before taking any further policy action.
Today’s decision may have been influenced by the falling oil price, which will be positive for consumers and industry in the medium-term.
Rising consumer confidence
In response to last month’s interest rate cut, the RBA would have been heartened by a positive reaction in consumer confidence, rising 8% in February.
However, this is just 1% higher than April last year.
Rising home prices and the stock market may have also been a positive influence.
However, the unemployment rate rose to 6.4% in February demonstrating the economy remains in flux.
Another rate cut
It’s Macquarie’s view that a second rate cut will be implemented in the coming months, based on the RBA’s growth outlook and the combination of weak commodity prices, the rising unemployment rate and soft consumer spending.
The Australian dollar
[sam id=53 codes=’true’] Supporting this view is that the RBA has commented on the Australian dollar’s value every month for the past 20 months.
The currency initially fell to 76 US cents on last month’s decision but has not seen any further downward momentum and in fact has averaged about 78 US cents since then.
The RBA agreed that a lower exchange rate was needed to help re-balance the Australian economy and for it to become more competitive.
The next RBA board meeting will be held on Tuesday 7 April
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