February 2014 Cash Rate Decision

February 04, 2014
David Thomas

A stronger than expected inflation result and improvement in business confidence has encouraged the Reserve Bank of Australia to leave the official cash rate on hold this month.  

At its Board meeting earlier today, the Reserve Bank decided to leave the cash rate on hold at 2.5% for the sixth consecutive month.   New research from National Australia Bank found business conditions and confidence is on the up, with conditions reaching a two and a half year high, further, the inflation results for the December quarter were stronger than expected, with underlying inflation climbing by 0.9% to sit right in the middle of the RBA’s target band range.  

This surprise jump in inflation in the final quarter of 2013 has reduced the chance of another rate cut in the official cash rate by the Reserve Bank.

On top of the strong inflation and business confidence results, consumer confidence currently remains comfortably in the zone where optimists outnumber pessimists.  

According to the latest Westpac Melbourne Institute of Consumer Sentiment Index, Australians are relatively optimistic about the economy. There is evidence that both house prices and housing activity are responding well to the low interest rate environment and this is no doubt having a positive impact on confidence.

The spate of positive economic data suggests the Reserve Bank of Australia was right to leave rates on hold this month. Further, it indicates that the official cash rate could remain on hold for some time.  

We expect the RBA to err on the side of caution and leave the cash rate untouched for the foreseeable future. With this in mind, now may be a good time for Australians to jump onto the property ladder and take advantage of this low rate environment, alternatively, if you already have a property, now could be a good time to review your current home loan and check to make sure you are still in the right product for your needs.


For further information, and to put yourself in the best position with valuable information and guidance, contact a trusted consultant from Mortgage Choice on 07 3286 7711.

Posted in: Interest rates

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