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RBA Decision for August

Discussion in 'Property Finance' started by Rixter, 4th Aug, 2015.

  1. Rixter

    Rixter Well-Known Member

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  2. Phil_22

    Phil_22 Well-Known Member

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    Media Release
    Number
    2015-13
    Date
    4 August 2015
    Embargo
    For Immediate Release
    Statement by Glenn Stevens, Governor: Monetary Policy Decision

    At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.
    The global economy is expanding at a moderate pace, but some key commodity prices are much lower than a year ago. Much of this trend appears to reflect increased supply, including from Australia. Australia's terms of trade are falling nonetheless.
    The Federal Reserve is expected to start increasing its policy rate later this year, but some other major central banks are continuing to ease policy. Hence, global financial conditions remain very accommodative. Despite fluctuations in markets associated with the respective developments in China and Greece, long-term borrowing rates for most sovereigns and creditworthy private borrowers remain remarkably low.
    In Australia, the available information suggests that the economy has continued to grow. While the rate of growth has been somewhat below longer-term averages, it has been associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year. Overall, the economy is likely to be operating with a degree of spare capacity for some time yet. Recent information confirms that domestic inflationary pressures have been contained. That should remain the case for some time, given the very slow growth in labour costs. Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.
    In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending. Credit is recording moderate growth overall, with growth in lending to the housing market broadly steady over recent months. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The Bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have been supported by lower long-term interest rates. The Australian dollar is adjusting to the significant declines in key commodity prices.
    The Board today judged that leaving the cash rate unchanged was appropriate at this meeting. Further information on economic and financial conditions to be received over the period ahead will inform the Board's ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    No big surprise there. If the increase rates, they send a bad message to businesses. If they drop rates, they send the wrong message to housing investors (even if it isn't passed on). They've managed to stalemate themselves, it could be a while before we see any rate changes.
     
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  4. KDP

    KDP Well-Known Member

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    Also of interest:

    The Federal Reserve is expected to start increasing its policy rate later this year, but some other major central banks are continuing to ease policy.
     
  5. Phil_22

    Phil_22 Well-Known Member

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    Cash Rate Implied Yield curve.PNG
     
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  6. 2FAST4U

    2FAST4U Well-Known Member

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    No surprises there. Employment growth is stronger than expected (RBA were forecasting unemployment for 6.5% at this stage in 2015 and it’s currently only 6%), while retail figures released for June were also much stronger than expected. Yet inflation is still below 2% so they do have the scope to lower interest rates if required.
     
  7. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    On an unrelated note, watch lenders rise rates due to "market conditions" or "increased cost of funding" or "we need to buy a bigger yacht with our bonuses"
     
  8. Rixter

    Rixter Well-Known Member

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    Nothing wrong with a bigger yacht.
     
  9. Redom

    Redom Mortgage Broker Business Member

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    Not sure what 'expert' commentary says yet, but my reading of their statement is that their is very much an easing bias.

    I think they're opening room up to fire a few more shots - although i don't think any of this will be passed onto investors.

    Not sure i see a stalemate - they've wiggled out of that one with APRA intervention.
     
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  10. KDP

    KDP Well-Known Member

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    I actually thought there was less easing bias than expected. They actually mentioned that they expected rates to go up later in the year...caveated due to various factors but as far as I'm aware (I may have missed it) this is the first time in a while where they actually talk about a rise with a timeframe. Dollar firmed on the statement.
     
  11. Tekoz

    Tekoz Well-Known Member

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    Let's hope that they are increasing it sooner than later. Otherwise people in Sydney will be keep on buying themselves causing the price to go up significantly.

    My take is that the interest rate will be increased on January or February next year the latest.
     
  12. Redom

    Redom Mortgage Broker Business Member

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    @KDP - thanks, my reading may be way off!

    They mention the US Fed rates rising and the uncertainty that may have on global markets. Last time it happened in May 2014 there was all the 'taper tantrum' in emerging markets, volatility, capital flow movement and sharp changes in currencies.
     
  13. KDP

    KDP Well-Known Member

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    No you're reading it perfectly right @Redom. The market is treating it as a positive statement but all they're doing is speculating as well.
     
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  14. Darren A

    Darren A Well-Known Member

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    Wasn't the reference to rates going up for the US fed to increase later this year not our very own guv..
     
  15. Tekoz

    Tekoz Well-Known Member

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    @Darren A and @Redom so my feeling is that once US Feds increase the rate, then I guess RBA will cut the interest rate for the last time this year.

    We should prepare for a financial / currency war at the end of this year.
     
  16. KDP

    KDP Well-Known Member

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    US increasing rate doesn't mean RBA will cut. The increase in US rate alone is enough to devalue the AUD.
     
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  17. Redom

    Redom Mortgage Broker Business Member

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    US raising rates MAY create volatility in emerging markets, that volatility can create problems/slowdowns.

    Its a 'risk' worth noting, but on its own, it won't sway the RBA to act one way or the other. It will be part of the consideration though.
     
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  18. KDP

    KDP Well-Known Member

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    Yeah it was. Sorry I didn't read it closely and then didn't explain myself clearly. For me this was the first time that the RBA has given more focus to and referenced the increase in US rates rather than easing of our rates in relation to the AUD.
     
  19. Tekoz

    Tekoz Well-Known Member

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    Hm... Yes you are right.

    So hopefully many tourist willing to visit and more overseas student study in Australian university this year forward.

    But yes, it will not be a good year for retail business.
     
  20. Darren A

    Darren A Well-Known Member

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    No probs KDP.

    As mentioned by Redon and KDP. IMHO if the US fed raises rates this should help our RBA in not having to lower any more or by as much. But if the US Fed raising does cause problems in other markets(or ours) then the RBA may continue to lower our rates.

    I think the US fed is very worried about raising their rates imho.
     
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