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RBA kicks off New Year with unsurprising rate decision

In its first Board meeting for 2016, the Reserve Bank of Australia decided to err on the side of caution and leave the official cash rate untouched at 2%.


In its first Board meeting for 2016, the Reserve Bank of Australia decided to err on the side of caution and leave the official cash rate untouched at 2%.

Continued property price growth combined with robust business confidence results ultimately gave the Reserve Bank no immediate need to change their current stance on monetary policy.

Data from CoreLogic RP Data shows property values continue to climb fairly steadily across most capital cities, with values increasing 0.9% over the month of January. Over the course of the month, Hobart, Canberra and Melbourne were the standout performers.

In Hobart, property values climbed 4.7%, while in Canberra and Melbourne values were up 2.8% and 2.5% respectively over the course of the month.

In addition to rising property prices, National Australia Bank's monthly business survey found business conditions were well above average in fundamental terms, while business confidence remains surprisingly robust.

But while these factors ultimately provided the Reserve Bank with the incentive they needed to leave the cash rate untouched for the ninth consecutive month, future rate cuts cannot be ruled out.

New data from the Australian Bureau of Statistics found annual underlying inflation fell to the bottom of the Reserve Bank's target band range.

Moving forward, depending on what happens with inflation, the Reserve Bank may have scope to ease the current monetary policy setting.

Furthermore, the Reserve Bank is likely to keep a close eye on consumer confidence, which last month recorded a 3.5% fall.

But regardless of what happens with the cash rate in the future, the reality is interest rates continue to hover around record lows, making now a good time to buy, invest or upgrade.

Further, for anyone who isn't happy with their current home loan provider or feel as though they could be getting a better deal, now is also a great time for property owners to review their home loan and make sure they are still in the right product for their needs.

Posted in: Interest rates

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