The local economy isn't as bad as it might seem.
In fact, it appears that the Reserve Bank of Australia may have actually become more optimistic regarding the future of the Australian economy.
Leading into yesterday's meeting, the market was divided about whether the RBA would cut rates, or leave them unchanged.
On the one hand, they were faced with weak inflationary figures; poor consumer confidence levels and rising mortgage rates from the Big Four banks. Commodity prices were also a concern – even BHP Billiton Limited (ASX: BHP) itself expects the iron ore price to continue crashing over the coming years.
But instead of focusing on the negatives, the Board noted "continuing US growth and a recovery in Europe" which partially offset continued weakness in Asia. It also referred to a "gradual improvement" in business sentiment over the past year, which could be attributed to what has been dubbed the "Turnbull effect".
So what does that all mean for interest rates in the immediate future?
Before the meeting, the financial markets were almost certain the RBA would cut interest rates in December. But now, it seems there was enough encouraging news to suggest a cut before the end of 2015 is unlikely with the markets pricing in a 71% chance of interest rates staying put at 2% for the remainder of the calendar year.
Although that will likely disappoint investors of your typical dividend-paying stocks, such as Telstra Corporation Ltd (ASX: TLS) and Commonwealth Bank of Australia (ASX: CBA), I think it's a good thing that the RBA held firm.
Interest rates are already sitting at a record low and the Board needs ammunition in case conditions do worsen. Personally, I think further easing likely will be necessary down the track – especially with the RBA adding a little easing bias into the statement, saying: "the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand."
While there mightn't be another interest rate cut this year, I still think high-yield dividend stocks are one of the best places to put your money today.
