Rates to stay on hold after last month’s reduction.
The RBA has left the cash rate on hold for another month, despite speculation it would drop again.
With recent inflation levels remaining low, there was division amongst industry experts as to whether another rate cut was on the table for March. However, the Reserve Bank of Australia Board has elected to keep the cash rate at the record low of 2.25 per cent.
In the official statement from RBA Governor Glenn Stevens, special mention was made of the current lending market:
“Credit is recording moderate growth overall, with stronger growth in lending to investors in housing assets. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months.”
Finsure Group Managing Director John Kolenda, said it will be no surprise to see the RBA make another rate cut in the coming months and it could even take the cash rate below 2.0 per cent for the first time.
“Central banks around the world, most notably China, have been moving their official interest rates south and the RBA will probably have to follow suit,” he said.
“Mining investment in Australia remains in retreat and other sectors have not picked up the slack so more is likely to be needed to reinvigorate the domestic economy. Further rate cuts may help to get things moving and boost consumer and business confidence, which has not been helped by the uncertain national political climate.”
Mr Kolenda said one concern from the RBA taking interest rates further down after a long period of inaction is whether it overheats the property market, which is already red hot in Sydney.
“Any nationwide lift in property prices is likely to result in a hasty correction from the RBA, which is always wary about housing prices,” he said.
“In the short to medium term interest rates should remain at low levels but borrowers should always be prepared for rates to inevitably rise again.”