On Melbourne Cup day (Tuesday 04 November) the Reserve Bank of Australia (RBA) decided to leave the official cash rate on hold again at 2.5 percent.
This was my only WIN of the day!!
In the past Melbourne Cup day has been synonymous with Interest Rate hikes!
For the past 20 years, the RBA has moved the official cash rate nine times on Melbourne Cup day, six of which were in the past decade.
This is also the 15th consecutive month with the rate on hold, since rates dropped in August 2013 by 25 basis points.
The RBA’s decision to leave the cash rate at 2.5 per cent didn’t surprise many, but was a welcome outcome before Christmas, one of the largest spending seasons of the year.
So what is the future of interest rates??
There is ongoing speculation that rates are likely to increase in 2015 and in contrast, there are some experts predicting a further cut.
Given the state of the economy with rising unemployment, a volatile stock market, a high dollar and rising concerns over global economic outlook, provides a strong case for lowering rates.
Regardless that rates are at a 60-years low – they could get lower if the economy doesn’t improve. There is speculation if the jobless rate increases, the RBA may move to cut rates as early as March next year.
Conversely, if the RBA drops the official cash rate there is a risk that this would further fuel the residential bubble due to current pressures on residential prices and the weak economic factors.
It would be hard to find any reason that the RBA would think about hiking rates let alone cutting rates while the housing market is still booming.
At this point in time, stability is needed.
It is anticipated that the next change will not be until August 2015 which will be weighing on the minds of buyers and sellers.