RBA tipped to reduce cash rate tomorrow

The Reserve Bank of Australia is just 24 hours away from cutting interest rates to record-low levels, two commentators have predicted.

Bill Evans, chief economist at Westpac, and Nathan McMullen, head of product and digital at RAMS, expect the central bank to move at tomorrow’s monthly board meeting, according to a survey by comparison website finder.com.au.

The official cash rate has remained at a record-low 2.5 per cent since August 2013.

Mr McMullen said that with consumer confidence and inflation low, the Reserve Bank will cut rates to help boost the economy and depreciate the Australian dollar.

The finder.com.au survey of 30 economists and commentators found that 28 expect the cash rate to remain on hold tomorrow.

It also found that 18 respondents are forecasting some sort of change in the cash rate during 2015, with nine of those expecting it to happen in the first quarter.

Opinion is divided on where rates are headed: 14 think the next move will be down and 16 think it will be up.

ANZ chief economist Warren Hogan said the Reserve Bank would probably give some sort of warning before any rate reduction.

“Although the balance of risks has sharply shifted towards further rate cuts over the past two months, we think the RBA board will wait to see a little more data before cutting rates,” Mr Hogan said.

AMP Capital chief economist Shane Oliver said that the Reserve Bank announced in December that it favoured a period of stability in interest rates.

Since then, soft economic growth and inflation has been offset by strong data for jobs and building approvals, Mr Oliver said.

Greater Building Society chief executive Scott Morgan said the Reserve Bank would be reluctant to cut rates due to concerns over investor lending and property prices.

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