Today at their monthly meeting the RBA decided to keep interest rates on hold.

The hold decision from the RBA came as no surprise today, considering labour markets are holding up and housing market conditions have moderated but remain firm.  The fact that the rate of capital gains has wound down across the housing market and investor activity is reducing from the highs of mid last year are likely to be welcomed developments from the Reserve Bank. 

Based on indices data released today by CoreLogic, capital city dwelling values rose by 1.4% over the most recent three month period and by 7.6% over the past twelve months; a substantial slowdown from the strong housing market conditions that were evident over the first half of 2015.  If the RBA were to provide another cash rate cut later this year, they probably wouldn’t need to worry too much about over stimulating the housing market; mortgage rates are already higher than a year ago due to the higher capital requirements implemented by APRA and the pace of investment credit growth is tracking well below the 10% speed limit imposed in December 2014. 

With inflation tracking around the bottom of the RBA target range of two to three per cent, the Reserve Bank can work to stimulate the economy by dropping the cash rate further if they see a requirement to do so.

Read RBA's media release here.