Interest rates remain on hold

Interest rates will remain at record lows for another month, with the Reserve Bank of Australia (RBA) choosing not to change the overnight cash rate of 2.5%.

The cash rate has remained at 2.5% since August 2013.

The decision will come as no surprise as the majority of property industry experts had already predicted the cash rate would stay on hold this month.

Property Observer’s editor at large Jonathan Chancellor told that the RBA prefers to “let the economy look after itself as much as possible”.

“We probably won’t see any shift until 2015 when it will most likely be upwards,” he said.

According to LJ Hooker chief executive Grant Harrod, the RBA’s decision will keep demand from investors at a strong level.

“It’s a finely balanced domestic economy that has made the RBA reluctant to shift its current ‘neutral’ monetary policy position,” says Harrod.

“It now looks likely interest rates will remain on hold for the rest of the year, barring any unforeseen events and it should boost consumer confidence as we approach spring.

“There is some speculation rates could be dropped even further if the Australian dollar remains high.”

Harrod doesn’t expect that rising house prices will cause the Reserve Bank to increase interest rates, so long as inflation remains in the 2-3% target range and the unemployment rate continues at under 6%.