Top network calls for interest rate rethink

The chief executive of Raine & Horne has said the Reserve Bank of Australia should consider following Europe’s lead in placing longer intervals between monetary policy meetings throughout the year.

His comment follows the RBA announcement last week that interest rates are to stay at a record-low of 2.5 per cent for the 11th consecutive month.  

At a recent meeting held by the Governing Council of the European Central Bank (ECB), it was announced its monetary policy meetings would now take place every six weeks from January 2015.

According to Raine & Horne chairman and chief executive, Angus Raine, Australia’s central bank should consider following Europe's lead.

“It’s a sensible move to have longer intervals between monetary policy meetings, and President Mario Draghi has indicated the ECB won’t make another decision on interest rates until last month’s judgement to drop some of its interest rates into negative territory has time to flush through the European economy,” he said.

“In the past, we’ve found decisions made by the RBA tend to take a few months to work their way through to consumer confidence, business activity and ultimately the real estate market, yet the RBA can make a change to monetary policy every month."

Mr Raine said he has seen how the lead-up to an RBA board meeting can cause “hype and speculation” and leaves buyers and sellers holding their breath before and after the outcome is announced.

“To be fair, the impact of the monthly meetings is not as emphatic in a bull run as we’ve enjoyed over the past two years, but I’m more concerned about the effect when the RBA starts tightening monetary policy with a series of hikes, which is expected to begin later this year or early next,” he said.

“Longer intervals between meetings could give the RBA more time for its decisions to work their magic and minimise the impact the meetings have on business and investment activity.”

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