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Category: Money and Monetary Policy / Economic Trends / Currency

Reserve Bank leaves interest rates on hold at 1.5pc

Tuesday, 6 Sep 2016 12:30:11 | Michael Janda

The RBA lowered interest rates to a fresh record low of 1.5 per cent in August. (AAP: Joel Carrett)

The Reserve Bank has kept interest rates on hold at the record low level of 1.5 per cent.

Australia's central bank cut interest rates by 25 basis points last month and, as it did after cutting in May, has elected not to make an immediate follow-up rate cut the next month.

One argument in favour of another rate cut was the failure of most banks to pass on the Reserve Bank's last move in full to mortgage and business customers.

However, outgoing Reserve Bank governor Glenn Stevens hinted in his last speech a couple of weeks ago that the RBA had anticipated that the banks would not pass on all of the rate reduction when it made its August decision.

Certainly, none of the 26 economists surveyed by Bloomberg ahead of today's board meeting expected the RBA to cut in September.

Market pricing put the odds of a rate cut today at less than 3 per cent, although there is a 35 per cent chance being priced in of interest rates falling again this year, and a 40 per cent chance of another rate cut at some point before the RBA finishes this cycle.

The Australian dollar moved little on today's rate call, being so well expected, and was fairly steady at 76.2 US cents by 2:38pm (AEST) having rising steeply earlier on unexpectedly strong economic data.

More to come.

AustraliaPlus


 

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