RBA to likely leave cash interest rate as is

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Australia’s official cash interest rate looks set to remain unchanged when the board of the Reserve Bank of Australia meets this afternoon.

The cash rate currently sits at 2% and experts appear to be in agreement that the RBA will make it three straight months of no changes following todays’ meeting.

All 31 respondents to website Finder’s monthly RBA Survey believe there will be no change, with many believing the full effect of rate cuts in February and May have not been felt.

The falling value of the Australian dollar and steps by regulators to try and slow the property market were other reasons commonly identified by respondents as to why the rate would remain unchanged.

“Some heat is expected to come out of the Sydney property market over the next few months as banks begin to tighten lending to investors. This will come as a relief to the Reserve Bank,” Grant Harrod from LJ Hooker said.  

“This, combined with a softer Australian dollar, gives the Reserve Bank time to take stock of market movements and wait until further data provides a clearer indication of how the economy is tracking.”

While there is no movement for the rate expected this week, more than half of respondents believe the cash rate will begin to rise from 2016.

On the other hand, around 40% of respondents believe there will be a longer period of rate stability that won’t result in a rate increase until beyond 2016.

One in five of the respondents believe there will be a rate cut before the end of the year.

“Messaging from the Reserve Bank has been quite clear; there is no strong case for rate adjustment - in either direction - for the time being,” Nicki Hutley from property consultants Urbis said.

“Further data reads - particularly for labour force and investment - will provide clues to the next move.”

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