As long as the global financial market uncertainty is still present, Australian Home Owners may be spared a further interest rate rise.
The RBA does not seem to be in any rush to lift interest rates further while the debt crisis in Europe plays out.
The bank’s June board meeting minutes suggest a further rate increase would be in August at the very earliest.
“Members judged that these previous monetary actions afforded policy the flexibility to await information on how the recent market uncertainty might affect the global economy, as well as the outlook for inflation,” the minutes said.
The RBA had raised the cash rate six times since October last year prior to its decision to leave policy on hold this month, including increases at the three preceding board meetings.
The minutes said global sentiment had deteriorated sharply in the period following the May board meeting as concerns about the fiscal position of Greece, Spain and Portugal intensified.
“Some governments were now in the very difficult position of having to tighten fiscal policy at a time when growth remained weak,” it said.
It noted that the consumer price index for the June quarter would be released in late July, which “would provide information on the extent of inflationary pressures in the economy”.
RBA Deputy Governor did express concerns about the situation in Europe and it’s possible impact on our economy.
He said if a government got into trouble it had to look to other governments or the International Monetary Fund (IMF) to bail it out.
Certainly Australia should not be too affected by the events in Europe, as we are in a fairly strong position ourselves. Economists are awaiting to see the results of our CPI in July to decide on future movements in interest rates.
“In times of uncertainty, the RBA tends to sit on its hands awaiting more data and developments,” said RBC Capital Markets senior economist Su-Lin Ong, who expects a rate rise in August.
“This looks especially prudent at present and rates are likely to remain on hold in July … (but) we acknowledge that there is a risk that this pause extends beyond a couple of months, especially if the European situation deteriorates further.”