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Interest Rates On Hold

By Rebecca Zhang

With the federal election looming, the Reserve Bank has decided, as expected, to leave interest rates on hold this month following last month’s decision to cut rates to a record low 2.5 percent.

The national economy remains in the neutral zone with no clear signs emerging of a sustained improvement or deterioration in activity generally. The Reserve Bank can however be expected to continue to act to stimulate growth if key indicators particularly the unemployment rate weaken over coming months.

The current level of the Australian dollar is also a factor that will continue to put a downward bias on interest rates settings over the short-term.

“With latest economic data remaining largely directionless, the Reserve Bank has unsurprisingly decided to leave interest rates on hold this month. Despite this month’s decision, interest rates are likely to fall sooner rather than later particularly if the forecast decline in economic activity becomes evident through rising unemployment levels”, says Dr Andrew Wilson Senior Economist for Australian Property Monitors.

“Housing markets however continue to revive off the back of the lowest interest rates in decades with Sydney, Melbourne and Perth reporting particularly strong late-winter buyer activity and prices growth”.

Source: www.domain.com

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