Uncertainty the key to steady interest rates

According to the RBA interest rates are set to remain on hold primarily because of the uncertainty in the current economic climate. 

The high Australian dollar continues to frustrate governor Glenn Steven’s attempts to stimulate domestic demand as a response to the slowing mining boom.

The economy has plenty of conflicting forces operating at the moment, with unemployment rising in July to a 12-year high of 6.4 per cent, wage growth stagnating and the RBA has cut its growth and inflation forecasts.

The Australian dollar has stayed above 90 US cents since March.

Business and consumer confidence have risen to their highest levels since the federal election in September.

In their minutes the RBA spoke about lending rates. 

“Average lending rates on housing and business loans in Australia continued to edge down over July, mainly owing to the ongoing replacement of more expensive fixed-rate and discount variable-rate loans,” the RBA said. 

“Overall, cumulative movements in interest rates since the start of the year amounted to a noticeable easing in financial conditions.” 

“The most prudent course was likely to be a period of stability in interest rates.” 

As for the property market, home prices rose 1.8 per cent in the second quarter prompting positive comments from the RBA. 

“Conditions in the established housing market also remained strong and while house price inflation across the country in 2014 had not been as rapid as over the second half of 2013, it has remained robust,” they said.


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