RBA hints strongly at another rate cut


In yesterday’s minutes from March’s RBA policy meeting it was clear further cuts to INTEREST RATES image this year could be on the agenda. 

This is despite the ongoing concerns about rising HOUSE PRICES image in Australia’s two biggest cities. 

Interestingly, there were also some comments regarding the COMMERCIAL PROPERTY image sector. The Reserve Bank said risks are beginning to mount in the commercial sector, with prices rising amid climbing vacancy rates and weakening rental conditions. 

The RBA kept rates on hold this month after a cut in February largely due to fears about an overheated property market. 

The Australian dollar is sitting around the US76c mark and the Reserve Bank said interest rate cuts from various central banks around the world had helped to keep the Australian dollar above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. 

The RBA wants to wait for solid indications that February’s rate cut – the first in 18 months – is working to stimulate the economy from its sluggishness in spending and consumer sentiment and rising unemployment. 

“In considering whether or not to reduce the cash rate further at this meeting, members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change,” the minutes said. 

“They also saw advantages in receiving more data to indicate whether or not the economy was on the previously forecast path.” 

The RBA also spoke of the risks in the housing sector, saying the property market CONTINUES image to be weighted towards investor activity, especially in Sydney and also in Melbourne. 

“Members judged it appropriate to hold the cash rate steady for the time being, while recognising that further easing over the period ahead may be appropriate to foster sustainable growth in demand while maintaining inflation consistent with the target,” the minutes said. 

That’s pretty clear language that interest rates could be headed south again very sooner rather than later.


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