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RBA reveals December cash rate call

03 December 2019 Cameron Micallef

The Reserve Bank of Australia (RBA) has announced its decision on the official cash rate for December, amid speculation the next rate reduction will be in February 2020.

Following today’s announcement, the official cash rate is 0.75 per cent, with the board deciding to hold interest rates for the time being. 

In the lead-up to today’s decision, comparison site Finder had surveyed 45 of the nation’s leading economists and commentators, and found a majority expecting a rate cut to be held off until February next year.

David Robertson, of Bendigo and Adelaide Bank, said: “[I] expect the RBA to remain on hold until February or May 2020, when another cut to 0.5 per cent is likely. QE may be more effective, in the absence of fiscal stimulus.”

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Highlighting a wait-and-see approach was Griffith University’s Tim Nelson who believes the economy should hold at current rates.

The RBA is likely to want to hold remaining rate cuts in reserves and wait to see how marco events play out including US election and impeachment, Brexit, AUD, property market stabilisation etc.

Despite today’s unchanged rate, Finder’s survey has foreshadowed even lower rates in the future, with 66 per cent of economists predicting a rate cut in 2020.

Finder’s survey has foreshadowed even lower rates in the future, with quantitative easing becoming a possibility. 

Graham Cooke, insights manager at Finder, said QE will be on the cards if the rate cuts continue to be ineffective beyond the housing market.

“The RBA said they may look to alternative stimulus methods once the rate hits 0.25 per cent,” Mr Cooke said.

“We’re only two cuts away from that, and the three cuts of 2019 have failed to stimulate anything beyond the housing market.”

On the bright side, a recession looks increasingly unlikely in 2020, with 89 per cent of experts not expecting an economic decline and 88 per cent thinking it unlikely that house prices will fall.

RBA reveals December cash rate call
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