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Rate-Cutting Cycle Comes to an End as Property Market Enters Up-swing

By Belinda McGuire

Owners of real estate in Rowville disappointed by the Reserve Bank's decision to leave rates on hold may be interested to learn that the property market is now in an up-swing.

That's according to Paul Bloxham, chief economist at HSBC, who said yesterday's RBA meeting result indicates the rate-cutting cycle is over, with future moves on monetary policy likely to see interest rates rise.

"Tactically, it pays the RBA to appear as though it's likely to cut, particularly given their concerns about the continued high Australian dollar, but a 'dovish bias' does not mean they will necessarily follow through," Mr Bloxham told The Australian.

In a statement following the bank's decision yesterday (April 2), RBA governor Glenn Stevens said the downside risk of global uncertainty is abating, while there are also several indications that interest rate cuts in 2011 and 2012 have had an "expansionary effect" on the Australian economy.

He added: "Further such effects can be expected to emerge over time.

"The board's view is that with inflation likely to be consistent with the target, and with growth likely to be a little below trend over the coming year, an accommodative stance of monetary policy is appropriate."

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