RBA rate announcement

The Reserve Bank of Australia has announced the result of its monthly board meeting.

The official cash rate has been left at a record-low 2.25 per cent following last month’s 0.25 per cent reduction.

Economists and commentators were fairly evenly split about whether the Reserve Bank board would cut the rate at today’s meeting or leave it on hold.

In a survey by comparison website finder.com.au, 16 of the 37 people surveyed expected a cut while the other 21 expected no change in the cash rate.

The rate-cutting camp noted that the low inflation rate gave the board room to move in an attempt to stimulate the economy and encourage a fall in the Australian dollar.

However, most experts felt the board would be reluctant to give more of a boost to the housing market and would want more time to assess the effects of last month’s rate cut.

St George Bank senior economist Janu Chan was one of those who felt that it was too much to expect back-to-back rate cuts.

“A rate cut over the next few meetings remains possible,” she said. “The strength of non-mining investment, house prices and exchange rates will be the key focus for the RBA over the next few months."

ME Bank’s general manager of markets, John Caelli, said today’s meeting had been a “50-50 call”, but that the board would definitely move in April.

“Rate cuts typically operate in cycles – you can expect more. What’s driving the falls is lower-than-forecasted growth and a desire to keep currency low,” he said.

Bank of Queensland’s head of market analysis, Peter Munckton, also predicted an imminent rate cut.

“The RBA will almost certainly go again in the early months of 2015. Which month the RBA [chooses to] cut will come down to tactical factors, such as the value of the Australian dollar,” he said.

Huw Bough from MyState also forecast another rate cut this year, most likely in April or May.

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