RBA kicks off 2018 with more rate stability

The Reserve Bank of Australia has kicked off its first Board meeting for 2018 in the same way that it started and ended 2017 – with no change to the cash rate.


February 06, 2018

The Reserve Bank of Australia has kicked off its first Board meeting for 2018 in the same way that it started and ended 2017 – with no change to the cash rate.

“I am not surprised to see the Reserve Bank of Australia once again leave the official cash rate on hold at 1.5%,” Mortgage Choice chief executive officer John Flavell said.

“The fact is, the global and the domestic economies are both performing relatively well at the moment.

“In Australia, the unemployment rate is sitting at just 5.5% - which is notionally full employment.

“Furthermore, consumer sentiment and business confidence have both been tracking higher in recent weeks.

“According to the Westpac Melbourne Institute of Consumer Sentiment, confidence tracked 1.8% higher throughout January so that optimists once again outnumbered pessimists.

“Meanwhile, National Australia Bank’s Monthly Business Survey found business confidence is buoyant and currently sitting at its highest level since July 2017.

“Globally, the Federal Reserve Bank in the United States is clearly confident about the state of the economy, given that the Bank lifted the Federal Funds Rate three times throughout 2017.

“Further, the Federal Reserve Bank has made it very clear that it will continue to increase the Federal Funds Rate throughout both 2018 and 2019.

“These factors combined make it clear that the domestic and global economies are performing well. The strength of the Australian economy against a backdrop of prolonged cash rate stability would no doubt provide the Reserve Bank with the confidence they need to believe their current stance on monetary policy is the right one.”

But while the cash rate has been left on hold once again this month, Mr Flavell said that there was a strong possibility of rate increases in the future.

“If the economy continues to track along nicely, consumer sentiment and business confidence remain robust, I don’t think we should be surprised to see some upwards rate adjustments,” he said.

“But, regardless of what happens in the future, it is critically important for borrowers and would-be property buyers to remember that interest rates are still sitting at low levels and are incredibly competitive, especially by long term standards.

“As such, anyone who has grand property plans that they would like to put into action in 2018, now is a great time to do just that.”


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