At their last meeting in April the Reserve Bank of Australia decided to leave rates un-changed, what will be the RBA Interest rate decision May 2015? We think that they will do the same at the May meeting. One of the key themes for the RBA has been the contrast between housing which they feel may be in a bubble in Melbourne and Sydney contrasting the broader economy which is sluggish. You can see these 2 issues clearly stated in the paragraphs below (which are from the RBAs April interest rate decision) for more information see: RBA Interest Rate Decisions
“Credit is recording moderate growth overall. Growth in lending to investors in housing assets is stronger than to owner-occupiers, though neither appears to be picking up further at present. Lending to businesses, on the other hand, has been strengthening recently. 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 risen, in part as a result of declining long-term interest rates.”
“In Australia the available information suggests that growth is continuing at a below-trend pace, with overall domestic demand growth quite weak as business capital expenditure falls. As a result, the unemployment rate has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate”
The march inflation data was recently released and will be one of the key pieces of data the board will consider at the upcoming meeting, the data shows slowing inflation with underlying inflation at 2.3% (once you allow for the decrease in petrol)
Author: Alan Maddick 28/04/2014
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