RBA in ‘wait and see’ mode

Domestic political uncertainty and global volatility have been cited as the main reasons the Reserve Bank chose to leave the official cash rate unchanged at 1.75%.

“England’s decision to leave the European Union, combined with ongoing uncertainty around Australia’s next government provided the board with the incentive they needed to leave the cash rate untouched,” Mortgage Choice CEO John Flavell said.

“I believe the board will wait to see what impact these recent events have on consumer sentiment and the broader Australian economy before making any changes to the official cash rate.”

Mr Flavell said future rate cuts could not be ruled out.

“Depending on what the end result of the federal election is and what impact it has on consumer confidence, as well as other key economic metrics, we may see the RBA cut the cash rate at least once more this calendar year,” he said.

CoreLogic head of research, Tim Lawless echoed this sentiment, flagging the possibility the cash rate could be moved lower next month if inflation figures did not meet the RBA’s target range.

“The changes of interest rates moving lower in August remain high,” Mr Lawless said.

“It is likely that the inflation figures will come in well below the RBA target range of 2-3%. If that is the case, there is a high likelihood that interest rates will move lower next month.”

 

Source: Emma Ryan – TheAdviser