RBA running out of room to cut rates
In the last Reserve Bank meeting, the RBA adopted a wait and see attitude, electing to leave official cash rates at 0.75%.
RBA governor sounded a cautiously optimistic tone, suggesting that the economy was beginning to show some signs of emerging from a soft patch and that it was time to assess the effects that the rate cuts were having on the economy. Mr Lowe, made it clear that he was aware that further rate cuts could send the wrong signal to Australians and drive confidence down further.
The RBA effectively has two rounds of rate cuts left within its disposal before that particular economic lever can no longer be used. Mr Lowe stated categorically that he could not envisage a situation where the RBA would enter the negative interest rate territory that some other e entered inWestern nations have the past couple of years. With this in mind, it is likely that the RBA will be cautious with regards to considering future rate cuts. However, even taking this into consideration, the market is expecting that the RBA may have little alternative but to cut interest rates again in the first half of 2020. Analysts point to the continued low growth in wages and low inflation rate to support their expectations.
Whatever the outcome, it is fairly certain that Australian homeowners and investors will continue to enjoy this low interest rate environment for the foreseeable future.
If you would like to see how you can take advantage of the current low interest rate environment, what your borrowing capacity might be or whether you are currently getting the best value home loan for your circumstances, give the team at AUstralian Finance Hub a call today.