RBA tipped to keep rates on hold

Jessica Darnbrough

The Reserve Bank of Australia is widely expected to keep rates on hold when it meets in Adelaide tomorrow.

While local economic data shows the Australian economy has grown at the fastest pace in three years, looming economic results abroad have indicated that some countries may even be at risk of double dipping into recession.

As such, AMP chief economist Shane Oliver said he expects the RBA to leave the official cash rate at 4.5 per cent for the fourth consecutive month.

"While a run of stronger than expected economic data culminating in above trend growth in the June quarter adds to the case for a rate hike this is likely to be balanced against uncertainty regarding the global outlook and expectations that inflation is likely to remain within the target range over the year ahead," Mr Oliver said.

Nevertheless, according to Mr Oliver, the RBA is still expected to lift the cash rate further in the near term to help keep household spending subdued and to ensure that the mining boom does not create an overheating problem.

"The RBA is also likely to signal that its bias is still to raise interest rates and that above trend GDP growth in the June quarter along with a massive boost to national income from higher commodity prices will have reinforced this."

 

Jessica Darnbrough

The Reserve Bank of Australia is widely expected to keep rates on hold when it meets in Adelaide tomorrow.

While local economic data shows the Australian economy has grown at the fastest pace in three years, looming economic results abroad have indicated that some countries may even be at risk of double dipping into recession.

As such, AMP chief economist Shane Oliver said he expects the RBA to leave the official cash rate at 4.5 per cent for the fourth consecutive month.

"While a run of stronger than expected economic data culminating in above trend growth in the June quarter adds to the case for a rate hike this is likely to be balanced against uncertainty regarding the global outlook and expectations that inflation is likely to remain within the target range over the year ahead," Mr Oliver said.

Nevertheless, according to Mr Oliver, the RBA is still expected to lift the cash rate further in the near term to help keep household spending subdued and to ensure that the mining boom does not create an overheating problem.

"The RBA is also likely to signal that its bias is still to raise interest rates and that above trend GDP growth in the June quarter along with a massive boost to national income from higher commodity prices will have reinforced this."

 

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