It’s unlikely to come today, but the Reserve Bank of Australia is getting closer to moving Australia’s official cash interest rate.
The first monthly Finder Reserve Bank survey for 2016 has 29 experts in agreement that the RBA won’t touch the cash rate during this afternoon’s board meeting; however there is growing sentiment that change is on its way.
More than a third of the experts surveyed believe the RBA will announce a rate rise sometime in 2016, while 52% of respondents predicted a rise in 2017.
Having sat unchanged at 2% since May 2015, it appears the cash rate may have hit the low point of its current run; with only 24% of respondents believe there will be any further rate reductions this year.
While he doesn’t believe the RBA will move the cash rate this afternoon, Shane Oliver, chief economist at AMP Capital, believes economic conditions may force the central bank to make a downward move in the near future.
“I think that given the emerging softening in the housing cycle, the ongoing mining downturn and renewed global market turmoil that the risks to growth are on the downside and given very low inflation the RBA should ease again. But I don't think it's convinced just yet,” Dr Oliver said.
But prominent economist Saul Eslake said there has been no real change since the RBA’s latest meeting that would warrant any movement.
“Nothing has happened since the last meeting to warrant a change in monetary policy settings,” Mr Eslake said.
“The fall in the exchange rate since early December is a sufficient response to the deterioration in global financial market sentiment,” he said.
The experts such as Eslake may not be the only ones who don’t believe another rate cut will come anytime soon, with Finder consumer advocate Bessie Hassan claiming borrowers are becoming more cautious.
“Over the past year the cash rate has fallen twice – in February and May 2015 – and finding better home loan rates has become a priority for many Australians,” Hassan said
“Interest rates in Australia are at historically low levels and the feeling is they are not going to get much lower. Borrowers are likely worried the pendulum will suddenly swing back and interest rates will start to rise,” she said.
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