RBA keeps cash rate on hold at 2% for seventh month in a row

The Reserve Bank of Australia has kept the official cash rate at 2% for the month of November.

This is the seventh month in a row where the cash rate has remained unchanged.

The RBA last cut the official cash rate in May by 25 basis points.

RBA governor Glenn Stevens said in a statement the official cash rate needs to accommodate more moderate economic growth.

“Low interest rates are acting to support borrowing and spending,” Stevens said.

“While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative. Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up.

“Growth in lending to investors in the housing market has eased. Supervisory measures are helping to contain risks that may arise from the housing market.”

Stevens hinted that a future cut to the official cash rate is still on the cards.

“The board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target,” he said.

David Lane, director of wealth management at Pitcher Partners, told SmartCompany the decision to leave the official cash rate on hold is a “prudent” one.

“We believe that the decision to remain at 2% is a prudent one for the RBA, as it provides them with additional room to move in 2016 should the economic growth in the early part of the year disappoint,” Lane says. 

“Underlying economic growth in Australia has been surprisingly resilient over the last 18 months, in spite of the severity of the decline in mining. The construction, tourism and in parts retail sectors are beginning to pick up some of the slack from the resources sector.”