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Home / Latest News / Cash rate remains on hold for October 2017

Cash rate remains on hold for October 2017

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Interest Rate remains at 1.50% in October

The Reserve Bank of Australia has kept the official cash rate on hold at 1.5 per cent in October. This marks thirteen consecutive meetings that have seen the historic low cash rate remain on hold, with the last movement being a 25 basis point rate cut in August 2016.

Researchers and economists alike widely predicted that the rate would remain on hold in October, while in the long term predictions are that rates will remain on hold into 2018.

RBA Governor Philip Lowe has again retained his optimistic outlook in his monetary policy statement that accompanied today’s decision, noting that “the Australian economy expanded by 0.8 per cent in the June quarter. This outcome and other recent data are consistent with the Bank's expectation that growth in the Australian economy will gradually pick up over the coming year”. Dr Lowe once again acknowledged the strong Australian Dollar noting that the appreciation since mid-year was a reflection of the lower US Dollar and warning that “the higher exchange rate is expected to contribute to continued subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.”

Over the recent months, there have been consistent signs that non-mining business investment is picking up, “A large pipeline of infrastructure investment is also supporting the outlook. Against this, slow growth in real wages and high levels of household debt are likely to constrain growth in household spending."

Dr Lowe’s statement in the previous month indicated that housing prices were starting to ease, particularly in Sydney. This was reflected in CoreLogic’s data for September that showed a fall in Sydney house prices for the first time in 17 months, while other capital cities recorded only marginal gains.

The slowdown in the housing market suggests that APRA’s introduction of a number of supervisory measures have started to have an impact with Dr Lowe noting that “following some tightening in credit conditions, growth in borrowing by investors has slowed a little recently.”

“In Sydney, where prices have increased significantly, there have been further signs that conditions are easing. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities."

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