This article is from the Australian Property Journal archive
THE Reserve Bank has yesterday lifted interest rates by 25bp to 4.25%.
This is the second month in a row interest rates have gone up and the fifth increase since April last year when rates were at a low of 3%.
ANZ Bank senior economist Shane Lee said the move is another step in the policy normalisation process.
“Moreover, the statement accompanying the change in policy suggests there has been no significant change in the Bank’s thinking around the need to return policy to a more normal setting.
“The Bank referred to the strength of the house price growth early this year and this follows on from last month’s statement that referred to the strength last year’s growth in house prices.
“Clearly, over the past couple of months the housing market has become an important consideration for monetary policy and policy may need to respond further if house prices continue to rise rapidly,” he added.
Looking ahead, Lee believes the RBA is in no rush to raise rates aggressively going forward.
He said following the move last month, the RBA will need some time to assess the impact of the 50bp increase in the cash rate this year.
“We expect that the Q1 underlying inflation outcome will be consistent with the Bank’s view that it will continue to ease back to around the middle of the target band and if this is the case, a move in May would be unlikely.
“We expect the next move by the RBA to be at the July meeting and that the cash rate will be 5% at year end,” he concluded.
Australian Property Journal
