During a meeting this week, the Reserve Bank of Australia (RBA) decided to keep the cash rate fixed at 2.0%. The RBA came to this conclusion after judging that “the prospects for an improvement in economic conditions had firmed a little over recent months”.
The RBA also observed that current low inflation conditions could present an opportunity for further easing of policy, should they find an opportunity to lend support to demand.
A statement by Glenn Stevens, governor of monetary policy decision for the RBA, revealed that the Federal Reserve in the United States is likely to start increasing its policy rate over the period ahead. Other major central banks, however, have continued to ease their monetary policies.
Interest rates are expected to remain consistently low for the next one or two years, Steven remarked in the statement. This will encourage borrowing and spending activity.
He highlighted that overall conditions are “quite accommodative” despite the recent changes in several lending rates for housing, which may have discouraged some borrowers.
Steven reassured that supervisory measures are in place to help mitigate any risks that may come from the housing market. There have been fears of a housing bubble, particularly in Sydney and Melbourne, where dwelling prices continue to climb.
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