Interest rates on hold - thank goodness

05 Décembre, 2019, 02:38 | Auteur: Auguste Feret
  • Longer term graph for GBPAUD

However, some economists think the central bank still has room to go lower next year.

Following a reasonably volatile 12 months in terms of property price movements and consumer access to mortgage funding, some sectors of the housing market appear to be responding to an environment of lower interest rates, particularly in Sydney and Melbourne.

"Given these effects of lower interest rates and the long and variable lags in the transmission of monetary policy, the board made a decision to hold the cash rate steady at this meeting while it continues to monitor developments, including in the labour market", RBA governor Philip Lowe said.

"It has also boosted asset prices, which in time should lead to increased spending, including on residential construction".

Lowe is optimistic that the economy has already reached a "turning point" and is on track to hit 3% growth by 2021.

Lowe said an "extended period" of low rates is expected to meet employment and inflation targets and the bank is "prepared to ease monetary policy further" to support growth.

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"A healthy and vibrant economy though needs a much broader base of growth".

"We imagine that if the data is looking sufficiently soft to merit a further rate cut, then in all likelihood, it will end up requiring two, so as long as the forthcoming labour data don't change the picture, then we will be looking to reduce our rate outlook to 0.25% by the end of 2Q20, and most likely scaling back our AUD forecasts too".

The RBA is likely to cut the cash rate during its first meeting for next year, said CBA economist Belinda Allen.

Allen said the official cash rate could be cut to 0.25% by the middle of next year.

"There are further signs of a turnaround in established housing markets", Lowe said. "If consumers are buoyed by recent interest rate cuts and this translates to big Christmas spending, it may form part of a fiscal stimulus that gets the economy moving", she said.

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