Surprise RBA move on rates

In an unexpected result, the RBA has today decided to cut the official cash rate to a record low of 1.25 per cent.

As today’s meeting approached, all 32 experts and economists from the finder.com.au RBA survey – and 85.94 per cent of the brokers surveyed by HashChing – predicted that there would be no change to the rate today.

Finder.com.au insights manager Graham Cooke said that the outcome of today’s meeting is surprising given that many believed the rate had dipped to its lowest point this cycle.

“In the past few months, there’s been an increasing sentiment towards a cash rate lift, so not many people saw this coming,” he said.

Mortgage Choice CEO John Flavell emphasised that there is a lot of volatility in domestic and global markets at the moment.

“In Australia, consumer sentiment is weak, inflation is sitting at two-decade lows and the latest business confidence reading suggests the market is concerned about the future,” he noted, pointing to the Westpac Melbourne institute index of consumer sentiment, which said that confidence rose just 0.1 per cent in January.

“The data found that pessimists outnumbered optimists for the second consecutive month,” Mr Flavell elaborated.

In addition to soft consumer sentiment, Mr Flavell highlighted that the latest data from the ABS found the annual rate of inflation hit a 19-year low.

“The Consumer Price Index numbers for the December quarter showed an inflation rate of just 0.5 per cent and a yearly price growth of just 1.5 per cent, well below the Reserve Bank’s target band range of 2 to 3 per cent.

“When you combine these results with the current moderate business conditions, it is little wonder that the RBA chose to cut the cash rate to the new record low.”