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Strong data prompts RBA to leave cash rate on hold

November 2, 2016 Financial No Comments Print Print Email Email
During its November Board meeting, the Reserve Bank of Australia announced it would leave the cash rate on hold at 1.5%.

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Today’s decision marks the third consecutive month that the Reserve Bank has left the cash rate untouched.

Mortgage Choice chief executive officer John Flavell said a spate of positive economic data ultimately prompted the Reserve Bank’s decision.

“There has been a lot of strong economic data coming out of the domestic market in recent weeks. Consumer sentiment is on the rise, business confidence remains robust, property prices continue to climb slightly higher, and the latest inflation result was better than expected,” he said.

“According to data from the Westpac Melbourne Institute of Consumer Sentiment, confidence rose 1.1% throughout October – meaning optimists once again outnumbered pessimists.

“In addition to that, the latest data from National Australia Bank showed business confidence remains reasonably upbeat despite the recent moderation in business conditions. At the same time, property prices rose 0.5% across the combined capital cities.

“And finally, inflation rebounded over the September quarter, rising 0.7%. Pleasingly, this result was higher than the 0.5% economists had been expecting.

“Knowing all of this, it is little wonder why the Reserve Bank chose to leave the cash rate on hold once again.”

Moving forward, Mr Flavell said he wouldn’t be surprised to see the cash rate remain on hold at 1.5% for some time yet.

“If the domestic economic data remains strong, there would be no immediate reason for the Reserve Bank to change their current stance on monetary policy,” he said.

But while the Board is likely to leave the official cash rate on hold for some time yet, Mr Flavell said future rate cuts cannot be ruled out.

“You never know what the future will bring. If we do see a downturn in the domestic economy, I think we could expect the Reserve Bank to cut the cash rate again.

“Regardless of what happens with interest rates over the short to medium term, the fact remains that home loan rates are currently sitting at record lows.

“So, if you have been thinking about buying, now could be the perfect time to do so.

“I would encourage anyone thinking of buying or reviewing their mortgage to speak to a professional mortgage broker to ensure they receive the right home loan for their needs.”

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