News

Reserve Bank leaves cash rate at 1.5%

08 February 2017

The Reserve Bank has left interest rates at their record low of 1.5 per cent in their first meeting for the year.

It is the sixth straight month that interest rates have stayed at this level.

RBA Governor Philip Lowe didn’t give much away in terms of the bank’s future moves on interest rates.

“Taking account of the available information, and having eased monetary policy in 2016, the board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving that inflation target over time,” he said in his official statement.

The RBA think economic growth will start coming in at around 3 per cent this year after weaker than expected figures for the September quarter.

“GDP was weaker than expected in the September quarter, largely reflecting temporary factors,” Mr Lowe said.

“A return to reasonable growth is expected in the December quarter.”

Economists largely interpreted the comments as a sign it was likely interest rates would remain on hold for the next few months.

It was also noticeable that Mr Lowe seemed well at ease with the state of the housing market in Australia in his RBA statement.

Mr Lowe said he might have to assess further rate cuts if the Australian dollar surged back up over the 80 US cents mark, but added that banking regulator measures to crack down on lending were working to make lenders take a more cautious approach.

Although not mentioned in his official statement, the elephant in the room is without doubt Donald Trump and his rise to the White House.

The uncertainty surrounding that and the future direction of the US as his presidency takes hold would have given the RBA the final strong reason to leave rates on hold again as they did this week.

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