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RBA signals plans to hold rates at 4.5 percent until 2011

The Reserve Bank of Australia has held interest rates at unchanged at 4.5 percent for the third month running, with the RBA signaling its plans to hold rates unchanged until 2011.

Reserve Bank AustraliaInflation for the June quarter was consistent with the Reserve Bank of Australia’s May forecasts, with underlying inflation declining to about 2.75 percent, the lowest rate for about three years. The rate of CPI increase was a little above 3 percent due to the effects of increases in tobacco taxes announced earlier in the year, but after taking this temporary aberration into account the RBA considers inflation to be contained.

The RBA expects underlying inflation to remain in the top half of the target zone through to mid 2011, signaling that rates are unlikely to change before the ABS’ CPI data is released late October, in time for the November RBA board meeting at the earliest, although most likely holding rates unchanged at 4.5 percent until early next year.

Australian broker Mortgage Choice, sees the decision as a positive influence on what is sure to be a very active spring selling season.

Company spokesperson Kristy Sheppard said, “We were really happy to see the June quarter inflation data was in line with the Reserve Bank’s expectations. It would have a come as a great surprise if the official interest rate was increased this month.”

Kristy Sheppard agrees that it is unlikely that the RBA will increase interest rates before the next release of CPI data from the ABS.

“It is likely the rate will sit at 4.5 percent until at least the next round of CPI data is released, on 27 October. This will be a great relief for anyone repaying a variable interest loan or approaching the end of their fixed rate term, just as it will be for those who are looking forward to jumping into the market during spring.”

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David Olsen

David Olsen

An undercover economist and a not so undercover geek. Politics, business and psychology nerd and anti-bandwagon jumper. Can be found on Twitter: <a href="http://www.twitter.com/DDsD">David Olsen - DDsD</a>

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