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No cut in August 2018 from RBA

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Today marks the second birthday of the Reserve Bank of Australia’s decision to change and then maintain the official cash rate at 1.50%. During its meeting on 7th August, the Reserve Bank of Australia (RBA) has continued to keep this same rate on hold for another month. As of 6th August 2016, this now stands as the longest ever streak that a single rate has been held in position consecutively without any changes. To date, there has been no official cash rate increase since November 2010.

Ahead of this Friday’s Statement on Monetary Policy, the RBA flagged a downgrade to its 2018 headline inflation forecasts. The bank still expects inflation to pick up in 2019 and 2020.

Many factors have led to this decision, including the bank’s continued cautious approach towards the housing market and its associated changes, as house prices in Sydney and Melbourne continue to decline. “Housing credit growth has declined to an annual rate of 5.5%. This is largely due to reduced demand by investors as the dynamics of the housing market have changed,” the RBA said.

“Lending standards are also tighter than they were a few years ago, partly reflecting APRA’s earlier supervisory measures to help contain the build-up of risk in household balance sheets. There is competition for borrowers of high credit quality.”

It comes after data released by research firm CoreLogic showed national house prices fell at the fastest pace since 2012 in the year to July to land 1.9 per cent below their September 2017 peak.

The Bank has made more positive remarks for other areas of the economy, including the low level of interest rates which continue to support growth and that further progress to reduce unemployment and reach target inflation is expected.

“Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

For the official RBA article, please visit the Reserve Bank’s website.