RBA leaves cash rate untouched at historical low
Have we reached the bottom of the rate cycle?
Strong consumer sentiment combined with moderate dwelling value growth has encouraged the Reserve Bank to leave the official cash rate on hold.
At today’s Board meeting, the Reserve Bank decided to leave the official cash rate untouched at the historically low level of 2%.
Local Mortgage Choice franchise owner Des Nation said the decision to leave the cash rate on hold was “largely unsurprising” given that the Board cut the cash rate just last month.
“Not enough time has passed for the Reserve Bank to truly understand what impact May’s rate cut will have on the domestic economy,” he said.
“It will take another month or so before the RBA sees what impact the last rate cut has on employment, inflation, business confidence and sentiment etc. And until such a time as we know what effect the May rate cut has on the economy, there is no reason for the Board to pull the rate lever.”
But while the Reserve Bank takes a wait and see approach to rates, preliminary data would suggest the May rate cut combined with the relatively benign Budget are starting to have the intended effect on the domestic economy.
“The Westpac Melbourne Institute Index of Consumer Sentiment rose by 6.4% in May to 102.4. This jump in sentiment marks the first time since February that the Index has been above 100 - the point which optimists outnumber pessimists,” Mr Nation said.
“Furthermore, new data from Core Logic found property price growth may be starting to moderate, with dwelling values falling 0.9% throughout May.
“This is the first month on month fall since November. No doubt the Reserve Bank would be pleased by this result, as the Board has consistently said the rapid growth in dwelling values across some of the capital cities is a worrying trend.”
While the Reserve Bank made the decision to leave rates on hold this month, Mr Nation said further rates cuts could not be ruled out.
“Whilst ever inflation is benign and there is continued uncertainty about global growth and markets, there is still reason for the Reserve Bank to move the cash rate lower in the future. For the time being however, it really is a case of watch this space.”
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About Mortgage Choice
Mortgage Choice is an ASX listed company that seeks to help Australians with all of their financial needs.
Established in 1992, Mortgage Choice was originally established to help Australians improve their financial situation by offering a choice of home loan providers, coupled with the expert advice of a mortgage professional.
Since that time, the company has grown and developed into a fully fledged financial services provider.
Today, Mortgage Choice helps customers source car loans, personal loans, credit cards, commercial loans, asset finance, deposit bonds, and risk and general insurance.
Further, the company offers Australians access to real, relevant and affordable financial advice through our qualified financial advisers.
Mortgage Choice has no balance sheet or funding risk, and consistently delivers strong profits and attractive yields. It listed on the ASX in 2004 (MOC) and is a member of the Mortgage & Finance Association of Australia (MFAA).
Mortgage Choice holds an Australian Credit Licence: no. 382869 and Mortgage Choice Financial Planning Pty Limited holds an Australian Financial Services Licence: no. 422854. Both licences are issued by ASIC.
Recent recognition: 2014 Australian Broking Awards Best Diversified Program; 2013, 2012, 2011 Australian Broking Awards Major Brokerage of the Year – Franchise; 2013, 2012 Australian Broking Awards Best Ethical/Social Responsibility Program; 2012 Australian Broking Awards Best Training and Education; No.1 on The Adviser magazine’s 2012, 2011, 2010 and 2009 Top 25 Brokerages list; 2012, 2010, 2009, 2008, 2006 and 2005 MFAA Awards Retail Aggregator/Originator of the Year; 2011, 2010, 2009 and 2008 10 Thousand FEET Top 10 Franchise list; 2010 Forbes Asia-Pacific Best Under A Billion list.
Visit www.mortgagechoice.com.au or call customer service on 13 77 62.