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May RBA interest rate update

May RBA interest rate update

By Mathew Tiller on May 02 2017

RBA holds rates steady

Cash rate remains at 1.50%

Inflation finally rises but ongoing strong property price growth, next week's, federal budget and soft employment and see's the RBA hold rates steady.

What’s the RBA thinking?

The RBA has maintained its current neutral monetary policy position and decided not to change the official cash rate during today’s board meeting.

A rebound in inflation, back into the RBA's target range of 2%-3%, softer employment growth and ongoing housing market strength have combined to influence toady’s result.

The RBA's decision, keeps the official cash rate steady at the record low of 1.50%.

Key indicators

  • Capital city home values rose just 0.1% in March and 11.2% over the past year.
  • Hobart saw the largest value growth over the past month up 1.0% followed by Adelaide (0.8%), Brisbane (0.6%) and Melbourne (0.5%).
  • Nationally, new listings are up 0.3% and total listings are down -3.2%, compared to this time last year.
  • ACT has seen the biggest rise in new listings up 17.4% compared to this time last year. This is followed by Tas (9.2%), NSW (7.8%) and WA (2.9%).
  • The unemployment rate edged up to 5.9% in March 2017.
  • The Australian dollar fluctuated between US$0.74 and US$0.77 over the past month.
Source: RBA, ABS, CoreLogic

Looking forward

Given the multi-tier strength of the national economy, it is expected that the RBA will hold the official cash rate steady over the remainder of 2017.

However, this does not mean that mortgage rates will remain at their current levels. As seen over recent months, banks continue move independently of the RBA, increasing rates and on fixed and interest only loans. This is expected to see property price growth begin to moderate over the second half of the year; especially in Sydney and Melbourne.

Given the RBA’s ongoing neutral monetary policy position, next week's federal budget provides a chance for the government to shift it's fiscal policy agenda to help stimulate growth, grow business investment and boost employment.

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