RBA tipped to leave rates on hold until 2017
After the RBA announced interest rates would remain on hold at 1.50% for September, some experts are predicting that we’ve seen the last rate change until next year.
Outgoing Reserve Bank Governor Glenn Stevens commented that “Financial markets have continued to function effectively. Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative.”
Most experts anticipated the Reserve Bank’s decision not to change rates, although many have instead been predicting a rate cut in November, flagging pressure to lower the Aussie dollar against the American greenback as one of the main reasons the RBA might make the decision to cut later this year.
“If September quarter inflation rate remains very low as we expect and the Fed remains in ultra-gradual mode regarding rate hikes as we also expect, then the RBA will cut again in November,” said AMP Capital chief economist Shane Oliver.
RELATED: Good news homeowners! 1% RBA cash rate just around the corner
Other experts, however, are expecting the RBA to stay the course and keep interest rates steady at least until early 2017.
"Economic conditions all point to another adjustment from the Reserve Bank - given completed construction levels dropped sharply in the last quarter, jobs and unemployment have shown no improvement since March and wage growth is subdued,” said Lynn Jordan, General Manager of Risk at Liberty.
“The urgency of any rate cut will no doubt take into consideration the impact of Government efforts to return the economy to benchmark GDP growth whilst also fighting deflation.”
Several European central banks as well as the Bank of Japan have dipped into negative interest rates this year, but Jordan said that monetary stimulus alone hadn’t been enough to produce the desired result in these markets.
Although Governor Glenn Stevens was distinctly unimpressed with the suggestion that Australia might follow the trend of dropping into negative interest rates, we are tipped to reach a new, record low official cash rate of 1% next year.
Jordan said that, in light of global trends in markets on a similar path to Australia, “there will be an increasing need for the government to use other measures such as fiscal stimulation if they are going to succeed in their objectives.”
Mozo will be keeping an eye on interest rates and bringing you up-to-date news on the Reserve Bank’s decisions for the rest of 2016. But in the meantime, battle record low interest rates by finding a high interest savings account to stash your cash in, or take advantage of the low rates to snag a great home loan deal.