RBA holds fire

The central bank kept rates at 4.5 per cent for the fourth consecutive month today.

The decision follows official figures that show economic growth has not forced an increase in inflation. Today’s decision, however, raises the question of when the borrowers will face another official rate rise over the next few months.

//

At the moment, borrowers are paying $300 a month more than they were in October 2009, when the RBA began a cycle of rate rises to keep the economy’s expansion sustainable. There have been six rate rises since last October.

Australia’s economy grew by 1.2 per cent in the second quarter, almost double the 0.7 per cent pace in the first quarter. Second-quarter inflation, however, rose by 0.6 per cent, less than the 0.9 per cent in the first quarter.

The nation’s big banks have been complaining about increased funding costs for months and they could move on rates independently of the Reserve Bank – a prospect that is more likely to happen once Australia’s political logjam has been resolved.

czappone@fairfax.com.au