RBA expected to leave rates on hold

Leading economists are confident that the Reserve Bank will leave the official cash rate unchanged at today’s board meeting.

If this proves to be the case, it will be the ninth month in a row that the RBA has made no change to interest rates.

AMP Capital chief economist Shane Oliver explained that the rise in headline inflation to back within the RBA’s 2-3 per cent target zone has reduced the pressure to cut rates. Particularly at a time when the RBA would rather not cut any way, he said, given worries about the Sydney and Melbourne property markets.

“Continuing low underlying inflation pressure at a time of very high underemployment, record low wages growth and a still too high Aussie dollar means that it's way too early to be thinking about raising rates,” Mr Oliver said.

“Our base case remains that the RBA will be on hold out to the second half of 2018 when rates will start to rise.”

Mr Oliver believes the RBA’s quarterly Statement on Monetary Policy, out Friday, is unlikely to make any significant changes to its forecasts.

Westpac chief economist Bill Evans is also confident that the RBA will leave the cash rate unchanged at 1.5 per cent.

“In fact Westpac has argued consistently since May last year that, after an expected cut in August 2016, rates would be held steady for the remainder of 2016 and 2017,” Mr Evans said.

“Earlier this year we extended that view with the expectation that the bank would also hold rates steady through 2018,” he said.

[Related: Funding pressures not to blame for rate hikes, says RBA]

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