RBA disappoints investors and retailers by keeping rates on hold

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Maree Mills from Tarragindi looking at Harvey Norman on Tuesday. Pic: Steve Pohlner

THE Reserve Bank has left the door open for another interest rate cut in coming months despite disappointing share investors and retailers by staying on hold this month.

The central bank opted to keep the official interest rate unchanged at 2.25 per cent but said “further easing of policy may be appropriate over the period ahead”.

Financial markets had factored in a 62 per cent chance of a cut to 2 per cent.

The decision to stay on hold sent the ASX 200 index 25 points lower to 5934 points on Tuesday. IG market analyst Chris Weston said investors had been gearing up for the market to break through the 6000 point mark for the first time since early 2008, but the rate decision led to a sell off.

“They were disappointed that the RBA didn’t cut the rate,” he said.

Banking stocks were all softer with Commonwealth Bank leading the way, down 63¢ to $91.92.

The Australian dollar shot up nearly US1¢ to breach US78¢ on the decision, and was trading at US78.14¢ on Tuesday night.

RBA governor Glenn Stevens said the Aussie dollar remained “above most estimates of its fundamental value”, and continued his mantra of a lower Aussie being needed to achieve balanced growth.

NAB chief economist Alan Oster said the central bank had bought time to plot its next move. “He (Glenn Stevens) wants to keep some of his powder dry to see what happens,” Mr Oster said.

Retailers had pinned their hopes on another rate cut to boost confidence. Australian Retailers Association executive director Russell Zimmerman said retailers were still struggling to entice consumers to open their wallets, ith low wages growth and unsettled economic conditions overseas contributing to lacklustre confidence.

He said that while the current period of stable interest rates was a positive sign for both business and consumers, more needed to be done.

“Talking to retailers they say they are still struggling,” Mr Zimmerman said. “The RBA should consider further rate cuts next month.”

Shopper Maree Mills from Tarragindi said low interest rates meant her family can afford to spend more on non-essential items. “We’re not going to jump into anything crazy but it does mean we can relax a little,” Mrs Mills said.

She said the stability of the economy, the unemployment rate and the possibility of another GFC were always at the back of her family’s mind.

“I think it’s important to always keep a bit in the bank,” Mrs Mills said.

“I’m optimistic about the next 12 months but you always need that buffer, just in case.”

http://www.couriermail.com.au

NAB passes on full RBA interest rate cut

NAB has passed on RBA’s cuts.

NAB has followed the lead of Commonwealth Bank and Westpac in reducing its standard variable home loan rate, passing on the full 25 basis points cut made by the Reserve Bank on Tuesday.

NAB’s standard variable home loan rate is now 5.63 per cent, a figure NAB said is its lowest standard variable rate in nearly 40 years.

NAB group executive personal banking said the average NAB customer with a standard variable home loan will save $62.50 a month. The new rate will be effective from February 20.

NAB’s move means ANZ is now the only Big Four bank to have not announced its intentions. The bank said it will make a decision by tomorrow.

When the RBA announced it would lower the official cash rate to a historic low of 2.25 per cent, the first lenders to pass on the cut were smaller outfits ME Bank, ING Direct and Bank of Queensland. Since then, Maitland Mutual, Newcastle Permanent and Greater Building Society have all cut their standard variable rate.

Subsidiaries of the Big Four banks that have announced their rate cuts — St George, BankWest and Bank of Melbourne — will also pass on the 25 basis points reduction.

Treasurer Joe Hockey has urged lenders to pass on the interest rate cuts to all customers including those with home loans, business loans and credit cards.

Source: http://www.couriermail.com.au

Far Northern homeowners to benefit from drop in interest rates to record 2.25 per cent

Kevin and Samantha Frisch with their children Madeleine, 11 months, and Beau, 3, outside

Cairns’ Frisch family can now put an extra $50 a month towards an end-of-year holiday to Melbourne.

Kevin and Samantha Frisch have two children – Beau, 3, and Madeleine, 11 months – and bought their Mt Sheridan home in 2007.

While Mr Frisch welcomed the saving, he believed rates could be further lowered.

“When you compare the interest rates to those in the US and most of Europe, where their centralised banks have them even lower than here in Australia, I believe we should be more in line with them, especially considering the recent losses in the monetary value of our dollar,” he said. “I really don’t think this cut will compel people to buy homes, although it might give those people with a mortgage some more comfort.”

Paying off the home loan was a priority for Edmonton couple, Mark and Jade Pinto, who bought their house in October. “I think it’s good, I hope the bank passes it on,” Mr Pinto said. “It will probably save us about $50 or so a month, which we will put straight on the home loan, we want to pay it off as soon as we can.

“We are quite comfortable with our budget at the moment but I think the cut will definitely help those families that are struggling with their mortgages – every little bit helps at the end of the day.”

The RBA’s move has been praised by real estate agents.

Source: http://www.cairnspost.com.au