Rates on hold until February

  • Official rates remain steady
  • Economic outlook remains problematic
  • Future rate cuts still possible
  • Spring housing markets flatten

The Reserve Bank has again decided to leave official interest rates at the record low of 2.0 per cent. Rates will have been on hold for eight consecutive months when the Bank meets again in February 2016.

Better recent economic news has encouraged the Bank to continue its current wait-and-see approach to rate settings. The latest unemployment data for October recorded a sharp improvement on the previous month with the seasonally adjusted jobless rate falling to 5.9 per cent - the lowest rate for the year.

The stockmarket has stabilised after recent volatility although the near-term outlook for equities remains cloudy.   

The Bank is also awaiting the decision by the US Federal Reserve Bank this month on US interest rates settings. An increase in US rates this month would likely have a significant impact on the local currency that remains above the desired level of policymakers.

Although rates remain on hold, the prospect remains for a cut next year. The outlook for local economic growth has deteriorated sharply and concerns persist over the current and likely future performance of the global economy.

Capital city housing markets continue to produce modest to moderate results at best with the recent sharp deterioration in the Sydney market reflecting the impact of rising mortgage rates over spring. Booming house prices growth in Sydney and to a lesser degree Melbourne over recent years will not be repeated next year with a significantly flatter price cycle now generally in prospect for all capitals.




Dr Andrew Wilson
Tuesday, 1 December 2015

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