RBA puts official interest rate on hold

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For the second consecutive month, the Reserve Bank of Australia has announced that the official cash rate would be left unchanged at a historical low of 1.75 per cent. The mortgage industry has welcomed the announcement, with many experts claiming that it is the ‘right move’ as it would provide scope for further cuts in the short term.

“As expected, the Reserve Bank has left interest rates on hold. I think they would like some more time to see the effect of the cut that happened in May,” said Firstmac chief financial officer James Austin. “It is likely that we’ll see a rate cut in the months ahead. But they do want to see some more inflation data before they make that decision.”

According to Austin, what probably influenced the Reserve Bank’s decision to maintain the current interest rate is the continuing high house prices, especially in Sydney and Melbourne. However, he pointed out that another rate cut might happen soon because of the low inflation and high Australian dollar.

Harley Dale, chief economist at the Housing Industry Association, also favored the Reserve Bank’s decision, although he also thinks that further rate cuts are in the works.

“Thanks in no small part to the strong contribution a national housing construction boom provided to the broader Australian economy in early 2016, a second reduction in official rates was never on the cards in June,” he said. “We live in a very fluid economic environment so it is appropriate that the RBA is willing to cut rates further this year, should it deem that necessary.”

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