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RBA Relaxed On House Prices

The Reserve Bank is monitoring the effects of its easy monetary policy on the economy but says there are few signs of a deterioration in lending standards at this point. Minutes from the RBA’s February board meeting reveal that members discussed the effects of low interest rates on financial and macroeconomic stability and “acknowledged the risks inherent in investors searching for yield in a low interest rate environment, including risks linked to higher leverage and asset prices, particularly in the housing market”.

However, they concluded that there were “greater benefits for financial stability from a stronger economy, while acknowledging the importance of closely monitoring risks in asset markets”.
It comes amid predictions of a double-digit percentage rise in house prices this year as the central bank keeps its benchmark interest rates at record low of 0.1%, while also injecting $5 billion a week of liquidity into the economy via its recently-extended bond buying program.
CoreLogic’s January house price index rose 1.1% month-on-month and 3.4% over the past three months.