Media release - 4th July, 2014

Following last night’s meeting of the Governing Council of the European Central Bank (ECB), it was announced that its monetary policy meetings will now take place every six weeks.

According to Angus Raine, Chairman/CEO of Raine & Horne, Australia’s central bank should consider following the European lead.

The ECB announced that the Governing Council meetings dedicated to monetary policy will change to a new six-week cycle, from January 2015. Non-monetary policy meetings will continue to be held at least once a month.

“It’s a sensible move to have longer intervals between monetary policy meetings and President Mario Draghi has indicated that the ECB won’t make another decision on interest rates until last month’s judgement to drop some of its interest rates into negative territory has time to flush through the European economy,” said Mr Raine.

At its June meeting, the ECB reduced its refinancing rate to 0.15%, the marginal lending facility rate to 0.40%, and the deposit facility rate to -0.1%.

“In the past, we’ve found that decisions made by the RBA tend to take a few months to work their way through to consumer confidence, business activity and ultimately the real estate market, yet the RBA can make a change to monetary policy every month,” said Mr Raine.

“Moreover, we’ve seen how the lead up to an RBA board meeting can be front page news and the hype and speculation leaves buyers and sellers holding their breath in the weeks before and after the outcome is announced, which stymies real estate activity."

Mr Raine added, “To be fair, the impact of the monthly meetings is not as emphatic in a bull run like we’ve enjoyed over the past two years but I’m more concerned about the effect when the RBA starts tightening monetary policy with a series of hikes, which is expected to begin later this year or early next.

“Even if the average mortgage repayment only goes up by $50, it can take homeowners two weeks to re-calibrate what they can afford.

“Longer intervals between meetings could give the RBA more time for its decisions to work their magic and minimise the impact that the meetings have on business and investment activity.”

-ENDS-

For further media information contact:

Angus Raine, Chairman/CEO, Raine & Horne on 0409 920 697

Andrew Harrington, National Marketing & Communications Coordinator on 02 9258 5400

RBA could follow Draghi’s lead says Raine & Horne