Economy

RBA holds cash rate at 1.5%

The Reserve Bank of Australia (RBA) has made its monthly cash rate call keeping the rate on hold at 1.5% for the 15th consecutive month since it cut rates by 25 basis points in August past year.

While no one expects that rates will change, there'll still be plenty of interest in the accompanying monetary policy statement, especially following a raft of weak reports on Australian retail sales, inflation and house prices released since the board last met on October 3.

Chief economist at ABC Bullion Jordan Eliseo correctly predicted that these slowdowns would not be enough to influence the RBA to impose a rate cut. A hold call was also expected by over 95% of mortgage brokers polled by HashChing.

"We still see the next move as down, but it will not come until Q1 2018 at the earliest", Mr Eliseo said.

While industry experts agreed on the outcome of the RBA's announcement, there was a difference of opinion regarding the future movement of the official cash rate.

The decision to keep interest rates on hold for the 15 month in a row comes as the nation's top economists start to ponder a slowing housing market and the devastating impact raising interest rates would have on Aussie households.

"If interest rates were to rise it would likely suck demand out of the economy with mortgagees spending a higher proportion of their income to service mortgage debt".

High levels of household debt also lower the possibility of a rate hike as this will further decrease levels of consumption, potentially dampening the economy and creating fewer new employment opportunities, he said. However, he expressed doubt that actual home loan interest rates will be left unchanged because of the RBA's decision.

While numerous bank's global peers, including the Federal Reserve, the Bank of Canada and the Bank of England, have raised interest rates as their economies pick up momentum, mixed trends in the Australian economy have the RBA cornered for now.



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