Reserve Bank keeps official interest rates steady in May

• RBA again leaves rates on hold
• Latest economic data remains mixed
• Official rates steady but mortgage rates still rising
• Housing markets robust

The Reserve Bank has decided again to leave official interest rates steady over May. Rates have now been on hold since August last year when they were cut to the record low 1.5 per cent.

Although rates remain on hold, latest economic data remains mixed with the national unemployment rate still at a year-high 5.9 per cent. Retail spending has fallen and although inflation has increased, levels remain at near record lows.

A near-term rate cut remains a possibility unless the national economy improves.

Mortgage rates, however, continue to rise, reflecting tightening bank margins and action by the financial regulator to restrict lending to residential investors.

Housing markets remain robust with most capitals recording solid price increases over the March quarter although at reduced rates compared with the previous December quarter results.

A recent surge in rents reflects ongoing shortages of available rental homes in most capitals.

Andrew Wilson is Domain Group Chief Economist

Twitter@DocAndrewWilson

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