RBA announces cash rate call

by Julia Corderoy05 Jul 2016
The Reserve Bank of Australia has left the official cash rate on hold at 1.75%, for the second consecutive month.

Economists and analysts almost unanimously expected the cash rate to remain steady today, according to finder.com.au’s monthly Reserve Bank survey, with 97% of those surveyed forecasting the cash rate would remain on ice.

Despite a volatile couple of weeks leading up to this announcement, Mortgage Choice CEO John Flavell said the Reserve Bank wouldn’t have wanted to add to the uncertainty.

“The UK'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 at 1.75%,” he 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.”

However, there is speculation that the impact of the Brexit vote may spark another monetary policy easing cycle, as early as August. 

“…Brexit might have an impact on the interest rates in the near future if US Federal Reserve delay the rate hike which would keep the Australian dollar higher than the RBA would like,” founder and CIO of  HashChing, Atul Narang, said in his response to the finder.com.au survey. 

“This might force RBA to cut interest rates again to stimulate the economy and to lower the Australian dollar.”

Others are suggesting that the cash rate could drop to 1.5% next month pending the inflation figures which are due out at the end of July.

“The central bank will wait until the CPI data release to assess inflation pressures,” Emily Dabbs, economist at Moody's Analytics said in response to the finder.com.au survey.