Following a drop in the cash rate last month to 2.25%, the Reserve Bank has today made the decision to leave the cash rate on hold for march.
During the Reserve Bank's decision, Glen Stevens, Governor, made the following comments:
"Growth in the global economy continued at a moderate pace in 2014. A similar performance is expected by most observers in 2015, with the US economy continuing to strengthen, even as China’s growth slows a little from last year’s outcome.
Commodity prices have declined over the past year, in some cases sharply. The price of oil in particular has fallen significantly. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global output and temporarily to lower CPI inflation rates.
Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns at all-time lows over recent months. Some risk spreads have widened a little but overall financing costs for creditworthy borrowers remain remarkably low.
In Australia the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak. As a result, the unemployment rate has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate.
Credit is recording moderate growth overall, with stronger growth in lending to investors in housing assets. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months. The Bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.
The Australian dollar has declined noticeably against a rising US dollar, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.
At today’s meeting the Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings."
Been thinking about making the move into home ownership? Now is the time to take action!
The Reserve Bank has held the cash rate at an all time low for over a year now, and this is great news for consumers. The cash rate being low means that banks and other credit providers around Australia are offering extremely low interest rates for you to take advantage of.
There is literally no better time than now to make the move into home ownership, or even refinance your existing mortgage. Your broker will be more than happy to review your current loan to make sure that it is still the most suitable and beneficial financial solution. Your circumstances, along with interest rates, may have changed since your mortgage was put in place and there may now be a better deal available for you.
You can give Iconic a call on 1300 663 943 to arrange a complimentary appointment with a senior finance broker to review your current financial solutions.
Have a great week ahead.
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