The Reserve Bank of Australia (RBA) decided to hold interest rates at 1%, does this help ASX shares?
The Reserve Bank of Australia (RBA) is Australia’s central bank. One of its biggest roles is to decide Australia’s interest rate, taking into account economic conditions including unemployment, inflation and the housing market. The RBA interest rate has a ripple effect across the whole economy.
The RBA’s Latest Interest Rate Decision
After two recent cut decisions to Australia’s interest rate, the RBA has decided to leave interest rates on hold for the moment.
However, Australia continues to display softer economic activity and the global economy also looks uncertain too. If these two areas were to deteriorate then the RBA would consider reducing the Australian interest rate further.
The Australian Financial Review quoted RBA Governor Philip Lowe in a statement:
“Economic growth in Australia over the first half of this year has been lower than earlier expected, with household consumption weighed down by a protracted period of low income growth and declining housing prices and turnover.
“There are further signs of a turnaround in established housing markets, especially in Sydney and Melbourne. It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target.”
It’s not surprising the RBA decided not to cut interest rates today. The Australian government posted a current account surplus of $5.8 billion for the June 2019 quarter thanks to a stronger trade surplus and a strong performance from the iron ore sector. We also saw house prices in Sydney and Melbourne go up more than 1% during August 2019.
Should We Buy ASX Shares Now?
The combination of positive factors seem to be good news for big banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC). Lower interest rates are supporting higher asset prices, but we must always be careful about the price we pay for our investments.
Regardless of what’s going on with the Australian economy I think the shares in the report, which are revealed for for free, could always be good ideas.
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