Interest rates could stay on hiatus

Thursday 01 July 2010

Article by Mozo

The Reserve Bank of Australia (RBA) may put official interest rates on an "extended pause" following the economic effects of consistent recent hikes, it has been suggested.

According to the latest RP data-Rismark Hedonic Home Value Index, the housing market cooled last month with house prices growing by only 0.5 per cent in May.

Colin Brinsden, economics correspondent for Trading Room, claimed that consecutive rate rises have taken the heat out of the housing market "while placing some restraint on businesses in their apparent frantic demand for new staff".

He also referred to fears in the global markets of a "double-dip" recession following the European debt crisis.

Mr Brinsden suggested that despite the RBA’s protestations that the economy is still in good shape, it may look to keep interest rates steady for the forseeable future.

He quoted Macquarie Bank interest rate strategist Rory Robertson, who argued that the weaker the markets and economic news are – both locally and overseas – between now and August 3rd, "the less likely the RBA is to hike in response to any consumer price index result".

Speaking to the AAP recently, Mitchell Watson, a financial analyst at Canstar Cannex, claimed that another global credit crunch could even lead to interest rate cuts.

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