RATE CUTS….

1downloadThe Reserve Bank of Australia has delivered the decision of its monthly board meeting.
As many experts predicted, board members opted to hold the official cash rate at its record low of 1.50 per cent.
In a unanimous decision, all 38 economists and experts in the finder.com.au Reserve Bank survey tipped today’s outcome.
Many of the experts cited soft inflation and a stubborn Australian dollar as the reasons the RBA chose to hold the rate, saying the bank remains in ‘wait and see’ mode.
“The RBA prefers to link its cash rate moves to quarterly CPI releases and the next is not until late October,” Australian Associated Press chief economist Garry Shilson-Josling said.
Many of the experts also believe that if the RBA is to make another cut this year, it will most likely be in later months.
“This time of year, it will probably drop before Christmas,” Raine & Horne executive chairman Angus Raine said.
CoreLogic head of research Tim Lawless echoed this sentiment, adding that a November cut is likely especially if inflation numbers remain low.
“If inflation was, say, 1.0 per cent year-on-year, that’s a pretty good reason for another rate cut,” Mr Lawless told The Adviser.
He added that the RBA’s rate cuts so far this year have not reduced the Australian dollar as hoped.
“To reduce the Aussie dollar, we’re going to need to start seeing the US rates starting to rise. There’s a lot more talk about that now which may take some pressure off the RBA to cut rates,” Mr Lawless said.
“It’s a very fine line they’re walking at the moment… trying to stimulate the economy without overstimulating the housing market.
“We’re already seeing interest rates creating a demand, so there is some risk that lower rates will continue to add some further fuel to the fire in Sydney and Melbourne, though I think other markets like Perth, Darwin and Brisbane could probably benefit from lower interest rates.”

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