RBA shrugs off falling house prices, weak inflation to keep rates on hold at 1.5pc

| 06.11,18. 03:47 PM |

RBA shrugs off falling house prices, weak inflation to keep rates on hold at 1.5pc

Falling house prices and continued low inflation have not altered the Reserve Bank's determination to keep its current interest rate settings.

The RBA kept its official cash rate on hold at 1.5 per cent at its Cup Day meeting.

That keeps rates at a record low and extends to 25 the record number of meetings without a change.

Despite another weak quarterly inflation reading last week — stretching the period core CPI has been under the RBA's target band to almost three years — the decision was widely expected.

Money markets priced in no chance of a change leading up to the decision.

On the flip side of weak inflation and falling house prices, the jobs market remains strong with the unemployment rate falling to 5 per cent, the lowest level since early 2012, and the economy is growing in line with the RBA's forecasts.

RBA remains upbeat

The RBA retained an upbeat stance in its post decision statement noting: "Forecasts for economic growth in 2018 and 2019 have been revised up a little."

"The central scenario is for GDP growth to average around 3.5 per cent over these two years, before slowing in 2020 due to slower growth in exports of resources," RBA governor Philip Lowe said.

"Business conditions are positive and non-mining business investment is expected to increase."

However, Dr Lowe said the outlook for household consumption was one continuing area of uncertainty.

"Growth in household income remains low, debt levels are high and some asset prices have declined. The drought has led to difficult conditions in parts of the farm sector."

The RBA nudged down its forecast for the unemployment rate, expecting it to fall to "around" 4.75 per cent in 2020 — a level regarded as full employment, which would normally be regarded as stimulating wage growth.

Balanced against the positive sentiment on employment and growth, the RBA was more measured in its outlook for inflation, saying it "remains low and stable" and its pick-up will only be gradual.

Property prices not a worry

The RBA's view of the cooling property market was little changed and not overly concerned.

"Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low," Dr Lowe said.

"Growth in credit extended to owner-occupiers has eased but remains robust, while demand by investors has slowed noticeably as the dynamics of the housing market have changed.

"Credit conditions are tighter than they have been for some time, although mortgage rates remain low."

Embed: RBA official cash rate


(Votes: 0)

Other News

All-hours shopping to reinvigorate Sydney nightlife economy Petrol prices surge 20pc this year, but analysts say not much can be done about it Stamp duty overhaul in NSW is little comfort to current homebuyers, Opposition says Police officer seriously injured in Belmont dog attack while trying to arrest man with knife Man charged with murder after altercation in Brisbane's south 'Earn and churn' GP consultations targeted Mother and son dead, three other family members fighting for life after head-on crash at Brimin, Victoria Canberra's bushfire remains out of control, but there's no immediate danger Victorian man Pande Veleski jailed for 20 years for killing French backpacker Sydney murderer for pushing wife into burning bedroom and blocking her escape ACT bushfire moving fast towards south Canberra after starting from burnt-out car Obeids' barrister reprimanded for unsatisfactory professional conduct Two dead in second light aircraft crash in NSW تحطم طائرة في نيو ساوث ويلز ومصرع ركابها الحكومة تذعن للضغوطات و تنقل عائلات من محتجزي ناورو إلى جنوب أستراليا Police examine in daylight the scene where Rodney Mitchell's body was found Two dead, one arrested after shootings in Victoria and New South Wales Nimmie-Caira wetlands restoration project underway as part of Murray Darling Basin Plan Toyah Cordingley: Police seek family possibly on beach near where woman's body found Your electrical goods could be covered by legal warranties years after you buy them Prepare for the great nurdle invasion, as a wave of 1 billion plastic pellets bears down on WA Share market ends flat after rollercoaster ride, Australian dollar slides to 32-month low House prices are falling in Sydney and ?Melbourne. So is it a 'buyer's market' yet Luke Foley rejects government calls to step aside over 'harassment' allegation Want cheaper power bills? The Government says it can save you up to $800 a year Eleven children transferred off Nauru for medical attention Woman's body found on isolated beach Light plane crashes west of Launceston, pilot suffers severe burns Severe storms bring damaging winds and hail to parts of south-east Queensland Wentworth by-election: Kerryn Phelps claims victory, Government loses majority