Rate decision too close to call

Industry experts are divided on whether the Reserve Bank of Australia will move the cash rate to a new record low.

According to a finder.com.au survey of 34 economists and commentators, 16 expect rates to fall, while 18 expect rates to remain at 2.25 per cent.

Bank of Sydney deputy chief executive Steven Pambris told finder.com.au that he believed the Reserve Bank would leave rates on hold to see what measures the federal government will implement in this month’s Budget.

Heritage Bank chief treasury officer Paul Williams has also forecast rates to remain on hold. “The Reserve Bank retains a bias to ease, but appears conscious they have limited monetary policy ammunition left, therefore they are being extremely cautious,” he said.

AMP Capital chief economist Shane Oliver told finder.com.au that a cut is coming, and will probably happen today.

“Growth is sub-par, the business investment outlook is weak, the Australian dollar is still too high and inflation is benign,” he said.

Rate cuts have also been forecast by CommSec economist Savanth Sebastian and BetaShares chief economist David Bassanese, with the former pointing to weak non-mining business investment, and the latter highlighting a firm Australian dollar and weak iron prices.

According to the survey, 21 of the 34 respondents expect the Reserve Bank to make at least one more rate reduction this year, while six have forecast two further rate cuts.

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