RATES TO STAY

THE Reserve Bank of Australia (RBA) has made an unexpected move to leave interest rates unchanged at 3.75 per cent.

RBA governor Glenn Stephens says the decision was made because lenders have been charging above the cash rate and the effects are still uncertain.

“Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point,” says Stephens.

“Since information about the early impact of those changes is still limited, the board judged it appropriate to hold a steady setting of monetary policy for the time being.”

But in his statement issued today Stephens hinted at further rate rises if the economy continues to recover as expected, as interest rates to most borrowers are still lower than average.

“If economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term.”

Suncorp Bank executive manager Tim Buckett says if the economy continues to strengthen the RBA will likely move rates back to normalised levels over the next six to eight months.

“The low rates seen throughout 2008-09 during the economic crisis were simply not sustainable in the long-term for Australia,” he says.