News

Reserve Bank leaves rates unchanged on Cup Day

08 November 2017

While the horses were stealing the show at Flemington yesterday for the Melbourne Cup, the Reserve Bank kept interest rates on hold at 1.5 per cent for another month.

Yesterday was the fifth Melbourne Cup in a row that rates have remained unchanged, but the RBA traditionally likes to make rate moves during the race that stops a nation while most eyes are distracted by the Flemington home straight.

Few economists were surprised that the RBA kept rates unchanged yesterday, and CoreLogic head of research Tim Lawless said economic conditions remain favourable for keeping rates steady.

“A slowdown in housing market conditions has helped alleviate some of the pressure to raise the cash rate,” he said.

“The fresh round of macro-prudential policies announced in late March have resulted in tighter credit policies and premiums on mortgage rates for investors and interest-only borrowers.”

“Tougher lending conditions have arguably had a similar effect as a lift in the cash rate, except the effect is more focused on slowing investment activity across the housing sector while low interest rates continue to provide a broader and much needed economic stimulus,” he said in a note.

The meeting was the 14th in a row where the Reserve Bank has kept rates at their record low of 1.5 per cent.

Canstar Group’s Steve Mickenbecker said yesterday’s Melbourne Cup day meeting held no surprises.

“Inflation is still below target range and even though jobs growth has been promising and sustained, the RBA wouldn’t want to move too early on rates with a threat of housing stress in the market,” he said.

“The Reserve Bank bias is still to increase rates, in particular given the Bank of England and US Federal Reserve have increased rates in recent times, but now is just not the right time for Australia.”

 

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