The Reserve Bank of Australia elected to leave interest rates unchanged at a record low of 1.5% with just two meetings remaining in 2016.
The result was hardly a surprise. According to the ASX, market participants were pricing in a mere 2% chance of a rate cut to 1.25% at today's meeting. IG also noted that not one of the 25 economists surveyed by Bloomberg expected the RBA to ease the cash rate today, despite a general climb in the Australian dollar recently.
Indeed, if the Australian dollar does experience a sharp rise from its current level of around US76.7 cents, the RBA could be forced to cut interest rates further. After all, a weaker dollar is supportive of our export market, and an upward reversal would likely complicate the adjustments deemed necessary for the local economy.
Meanwhile, the RBA is also aware of a large decline in business investment and the low inflation rate, although the low interest rates currently available on loans should help to bolster those measures over time.
It remains unclear when, or if, the Reserve Bank will lower interest rates again after having done so as recently as August (and also in May). There wasn't much in the way of easing bias in today's announcement, however, suggesting that the board's new governor, Phillip Lowe, will take a more gradual path to achieving the RBA's target rate of 2% to 3% inflation growth.
That said, it's also unlikely that they will hike interest rates anytime soon, meaning that interest rates are likely to remain lower for longer.
Although some of the most popular dividend shares are arguably out of the buy-zone, investors could still look to others such as Retail Food Group Limited (ASX: RFG). Offering a fully franked yield of 3.5%, or 5% gross, that's greater than what you'd likely receive from stashing your money in the bank.
