Reserve Bank makes key interest rate decision

The Reserve Bank of Australia has announced the result of its monthly board meeting amid a climate of rising house prices and sluggish growth.

As expected, the Reserve Bank left the official cash rate at a record low of 2.0 per cent, where it has been since May.

All 33 economists and commentators surveyed by comparison website had forecast that rates would remain on hold.

It’s possible the cash rate will fall further in 2015, but the feeling was that today would’ve been too soon, given that a 0.25 per cent cut was made in February and a 0.25 per cent cut in May.

HSBC chief economist Paul Bloxham told that the impact of those two rate cuts still needed to be assessed by the Reserve Bank.

Commonwealth Bank chief economist Michael Blythe said the board was in “wait-and-see mode” while it assessed incoming data, such as inflation statistics due in late July.

Board members are facing conflicting urges: cut rates to stimulate the sluggish economy; or lift rates to cool the Sydney and Melbourne housing markets.

According to the survey, 12 of the 33 respondents expect another rate cut this year, while two said rates would rise in 2015.

The survey also found that 18 believe the Reserve Bank will start lifting rates in 2016.

[Related: Interest rate cuts have added 1% to house values]

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