RBA decides to keep interest rates at 1.5% in last meeting for 2018

The Reserve Bank of Australia has decided to keep interest rates at 1.5% for the 28th month, in their last decision for 2018.

RBA keeps rates unchanged in december policy
Source: Bloomberg

As highly expected by many economists, the RBA board has decided to leave the cash rate unchanged at a 1,5% low for the 28th month. The board said the global economic expansion is continuing, with low unemployment rates in most economies.

Economists predict a cut won’t happen anytime soon, but as time passes some suggest a cut could be more and more likely

The board expressed some concerns of a slowdown in global trade from ongoing trade tensions, however the board notes inflation remains low, globally, with an increase from a lift in oil prices.

IG Market Analyst Kyle Rodda says the RBA delivered what was expected, with very little new information.

“Markets aren't pricing much of a change all of next year. Global growth is forecast to slow down, so we may well be vulnerable to that. Traders aren't confident in the RBA's ability to hike any time soon.” Said Mr Rodda.

Housing market slowdown

The Board has noted that conditions in the Sydney and Melbourne housing markets have eased nationwide, with rent inflation remaining low.

“Credit conditions for some borrowers are tighter than they have been for some time, with some lenders having a reduced appetite to lend. The demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed.

Growth in credit extended to owner-occupiers has eased to an annualised pace of 5-6 per cent. Mortgage rates remain low, with competition strongest for borrowers of high credit quality. The low level of interest rates is continuing to support the Australian economy.” The RBA monetary noted.

Australian dollar price

The Australian dollar against the greenback just before the release was sitting at 73.6, with little movement in response to the December decision. Analysts say the December decision comes to no surprise, with the RBA monetary statement vastly like the November statement.

The Australian dollar is not expected to move substantially in response to the highly predicted 1.5% cash rate.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Find articles by writer