Yesterday, the RBA kept interest rates the same. Again.
It seems that the RBA’s decision to keep interest rates at historically low levels came and went with barely a murmur.
The mainstream media is currently avoiding discussion of the implications of this policy for the Australian economy.
There is little talk of how the RBA has allowed for the Australian economy to be flooded with cheap money.
There is little talk of how this results in an expansive banking sector and housing bubble.
There is little talk of how the RBA will be starved of options if the housing downturn worsens.
Overall, the silence which surrounds interest rates is deafening.
Interest rate cut
AMP chief economist Dr Shane Oliver sees this policy continuing until 2020, with the chance of a cut:
‘Home price weakness is at levels where the RBA started cutting rates in 2008 and 2011, so we still can’t rule out the next move in rates being a cut rather than a hike.’
A rate cut would leave the RBA with even less firepower at its disposal if things turn sour.
RBA Governor Philip Lowe said that:
‘Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.’
It’s as if the RBA board thinks we have had sustainable growth for a long time.
So don’t take silence for granted.
There will be a lot more noise around interest rates soon.
For Markets & Money
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