[nectar_dropcap color=”#0071bc”]A[/nectar_dropcap]t its meeting today, the Board decided to leave the cash rate unchanged at 2.25 per cent.
We see this as welcome news particularly for retirees, many of whom rely on cash deposits as part of their income needs.
We have some concerns in this falling interest rate cycle, as investors take on more risk searching for a better return on their money, and in doing so unwittingly expose themselves to potential losses in an increasing, and somewhat more expensive share market.
In making their decision today, the Reserve Bank Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target.
Growth across the globe continues at a moderate pace, with the U.S economy continuing to strengthen. In Australia growth is below trend, and demand overall weak. A rising unemployment rate will contain labour costs and that coupled with lower energy costs is likely to contain inflation.
The Board also cited caution over increasing property and other financial markets due to the declining long-term interest rates. The Reserve Bank is working with other regulators to assess and contain any risks that may arise as a result (of increasing asset prices).
Whilst the RBA Board have cited that further easing of rates maybe appropriate over time, any signs of life in the economy such as an improvement in consumer and/or business sentiment, or business willing to invest, could well mark the end of the current easing cycle.
If you would like to chat about how this impact your financial goals please call me on 5331 6550 or email andrew@arwm.com.au
