We know interest rates are on hold, but what’s ahead? – Pete Wargent

The fact that the Reserve Bank kept interest rates on hold at 2.50% was not much of a surprise.

As ever, there will be plenty of analysis of the wording of the media release.

Most notably, the RBA has dropped its easing bias.

In other words, we may well have seen the last of the interest rate cuts for this cycle.

[sam id=40 codes=’true’]One of the key paragraphs stated:

“Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments.

Credit growth remains low overall but is picking up gradually for households. Dwelling prices have increased further over the past several months. 

The exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy.”

For the goobledigook being spouted about an RBA intervention in the housing markets, there is not a single shred of evidence of it here.

Moreover, the Reserve has noted previously that an uplift in dwelling prices should help with a flow-through into higher levels of construction, which is a clear goal in the coming years.

“In Australia, information becoming available over the summer suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have shown improvement. 

 At the same time, with resources sector investment spending set to decline significantly, considerable structural change occurring and lingering uncertainty in some areas of the business community, near-term prospects for business investment remain subdued. The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. Growth in wages has declined noticeably.”

 So, there you have it.

Don’t expect any more interest rate cuts unless the outlook declines from here.

Interestingly, the lack of easing bias wrong-footed the currency markets.

The Aussie dollar quickly leapt by an enormous 1.6% up to 88.9 cents in double-quick time. Biggest one day move we have seen in nearly half a year.



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is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. Using a long term approach to building businesses, investing in equities, & owning a portfolio he achieved financial independence at the age of 33. Visit his blog

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