The Reserve Bank has left the official cash rate on hold at a record low 2 per cent in June after having cut it last month.
A 25-basis-point cut in May took the benchmark rate to a fresh record low, and pulled the cheapest discount mortgage rates to around 4 per cent per annum.
After having moved last month, the decision to leave rates steady to see what effect that cut would have surprised no-one – all 29 economists surveyed by Bloomberg expected rates to remain steady in June at 2 per cent.
However, the Reserve Bank has probably disappointed many of those analysts with the governor’s post meeting statement.
Most were expecting the reintroduction of an explicit easing bias, implying that the bank was more likely to cut rates at future meetings than it is to hike them.
Instead Glenn Stevens delivered a neutral statement that merely reiterates that the bank will make future rate decisions based on the data to hand.
“Information on economic and financial conditions to be received over the period ahead will inform the Board’s assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target,” the RBA governor noted.
CommSec chief economist Craig James told ABC News that the neutral language appears calculated to stop investors betting that rates will fall further.
“There’s a number of economists saying that the next move in interest rates will be up, with one speculating that it will be February or March next year,” he observed.
“Now that could be a little bit early in the piece, but certainly economists are now a lot more divided on the next move in interest rates.”
TD Securities chief Asia-Pacific macro strategist Annette Beacher forecasts that rates have hit bottom, but that another cut is still possible.
“We remain of the view that the RBA is comfortable with a terminal cash rate of 2 per cent,” she wrote in a note on the decision.
“However, as we expect weak data reports in the weeks and months ahead, the next move (as captured in market pricing) is more likely to be down than up.”
Markets are currently pricing in about a two-thirds prospect that interest rates will fall further.
Despite the increased focus on high home prices since the Commonwealth Treasury secretary John Fraser yesterday declared that Sydney and parts of Melbourne were “unequivocally” in a bubble, the Reserve Bank governor left his comments on the topic unchanged from last month’s statement.
All The Best The Geraldton Property Inspection Team
