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RBA rate announcment

The Reserve Bank of Australia has announced the result of its monthly meeting following a period of intense market speculation.

In what was probably a close decision, board members decided to leave the official cash rate at a record-low 2.25 per cent, where it has been since February.

According to a finder.com.au survey of 34 economists and commentators, 18 had expected rates to remain on hold, while 16 had expected rates to fall.

Many thought the Reserve Bank would cut rates to stimulate the economy and bring down the Australian dollar.

However, it appears the Reserve Bank decided it needed more time to assess the impact of the February rate cut.

Board members may also have been wary about further stimulating the booming Sydney property market and the strong Melbourne market.

ING Direct head of treasury Michael Witts correctly predicted that rates would remain on hold today despite the recent rise in the Australian dollar.

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“Increasingly, recent data has been indicating that the economy is perhaps in a better state than previously anticipated,” he told finder.com.au.

“This, together with the near-term release of the Budget, some recovery in commodity prices – especially iron ore – and the significant cut in reserve requirements, all point to the Reserve Bank continuing with their ‘wait and see’ approach.”

LJ Hooker chief executive Grant Harrod also predicted today’s result, partly because of the recent fall in unemployment from 6.2 to 6.1 per cent.

“Commodity prices have also begun to recover in the past few weeks, although how sustained a recovery this is remains to be seen,” Mr Harrod said.

“With the east coast housing market still a concern for the bank, we expect the latest data to allow the bank to hold rates but retain an easing bias.”

The official cash rate is likely to fall at some point this year, with 21 of the 34 survey respondents expecting at least one more rate cut in 2015 and six expecting two more cuts.


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