RBA predicted to leave rates on hold

The Reserve Bank of Australia (RBA) is likely to leave the cash rate on hold at a record low of 1.50 per cent when it meets later today.

RateCity.com.au’s analysis of over 20 domestic and international economic indicators found a rate change this month is unlikely.

RateCity.com.au CEO Paul Marshall believes the RBA will continue their “wait and see” approach.

“With inflation running at 2.1 per cent, within the RBA’s target band of 2-3 per cent, and unemployment at 5.5 per cent, our economy is stable.

“We believe the Reserve Bank still needs more time to monitor the impact of APRA’s changes to lending requirements before making a decision to move on rates.”

The days of cheap money could be numbered

“APRA so far has done some of the Reserve’s heavy lifting. Over the last few months, Australia’s big four banks have increased rates for investors paying interest-only,” Mr Marshall said.

“The gap between those doing the right thing and paying down their principal and interest and those paying interest-only is now significant.

“Time will tell whether the rate hikes will be enough to deter property investors. The latest market snapshot from Corelogic revealed prices in Sydney have rebounded by 2.2 per cent in June after falling in May. 

“However, even if the Reserve keeps rates on hold this month, the celebration could be short-lived.

“As economies around the world continue to strengthen, we are likely to start seeing interest rates move in an upward direction. The days of cheap money could be numbered.”

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