Newspaper article News Mail Bundaberg Qld.

Interest Rates Put on Hold at 2%, but for How Long?

Newspaper article News Mail Bundaberg Qld.

Interest Rates Put on Hold at 2%, but for How Long?

Article excerpt

Byline: Danielle Cahill

THE Reserve Bank of Australia has opted to leave interest rates on hold at 2% amid economic uncertainty and a slowdown that has seen house prices stall in some markets.

The RBA hasn't changed the cash rate since last May when it cut it by 25 basis points.

With inflation at 1.7% according to the Australian Bureau of Statistics and unemployment now at 6%, up from 5.8% in December, most economists had predicted that the RBA would leave interest rates on hold for now.

Is this good news?

CoreLogic RP Data research director Tim Lawless has welcomed the decision.

"The hold decision from the RBA came as no surprise today, considering labour markets are holding up and housing market conditions have moderated but remain firm. The fact that the rate of capital gains has wound down across the housing market and investor activity is reducing from the highs of mid last year are likely to be welcomed developments from the Reserve Bank," he said.

But with the downturn in the resource sector continuing as commodity prices decline and banks tighten lending criteria, Lawless say this may not last.

"If the RBA were to provide another cash rate cut later this year, they probably wouldn't need to worry too much about over stimulating the housing market - mortgage rates are already higher than a year ago due to the higher capital requirements implemented by APRA and the pace of investment credit growth is tracking well below the 10% speed limit imposed in December 2014," Lawless said. …

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