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Cash rate on hold at 1.5%

The Reserve Bank of Australia (RBA) has today made the unsurprising decision to leave the official cash rate on hold at 1.50%. This marks the 22nd consecutive month the rate has been left unchanged.

There are several signs in the economy that would have informed the RBA board’s decision to not rock the boat.

According to the Australian Bureau of Statistics (ABS) the nation’s unemployment rate is sitting at 5.6%, which is notionally full employment.

Further, according to the latest Westpac Melbourne Institute Index of Consumer Sentiment, consumer confidence has continued to drift lower as they feel that family finances are under pressure.

Encouragingly, NAB’s Monthly Business Survey found that business confidence is currently at its highest level since the survey began in March 1997.

Another sign the RBA board would be acutely aware of are falling national dwelling values. CoreLogic’s Hedonic Home Value Index found that national dwelling values recorded their first annual decline since 2012, fueled by falls in Sydney and Melbourne and offset by regional dwelling values which have risen in the same period.

The RBA board targets a specific inflation range between 2-3% however, the latest inflation data from the ABS shows that headline inflation is currently below target at 1.9%.

While the RBA board has continued its cautious approach to monetary policy for some time now it is important that borrowers and would-be buyers realise that a change to the cash rate is not far in the future.

The market expects a cash rate rise within the next 12 months and the RBA board has confirmed the next rate change will likely be up and not down.

For this reason, it is important that borrowers take a proactive approach towards their home loans to ensure they are still getting the right deal for their individual circumstances.

Posted in: Interest rates

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