The Reserve Bank of Australia (RBA) has decided to keep the cash rate at 1.5 per cent for the 25th consecutive month.
Chief economist at AMP Capital Shane Oliver, who predicted a hold verdict, said that the lull in credit and housing market activity would offset positive employment sentiment.
“The fall in the official unemployment rate to 5 per cent helped by above-trend economic growth is good news,” Mr Oliver said.
“But the slide in home prices in Sydney and Melbourne risks accelerating as banks tighten lending standards, which in turn threatens consumer spending and wider economic growth, and inflation and wages growth remain low.
“Against this backdrop, it remains appropriate for the RBA to leave rates on hold.”
While also predicting a hold decision, economist at Market Economics Stephen Koukoulas said that based on the RBA’s own inflation targets, the central bank should consider cutting the official cash rate, with headline inflation reported at 0.4 of a percentage point in the third quarter of 2018 (Q318), falling below market expectations of 0.5 of a percentage point.
“The RBA is continuing to ignore its inflation target; otherwise, it would be cutting,” Mr Koukoulas said.