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Speculation grows ahead of February 3 rates decision

by Staff Reporter10 minute read
The Adviser

Another economist has had his say on whether the Reserve Bank of Australia will reduce interest rates at its upcoming board meeting.

BetaShares chief economist David Bassanese said the Reserve Bank is likely to leave the official cash rate at 2.5 per cent during 2015, with a cut more likely than an increase.

Speculation has grown about what the Reserve Bank will do at its February 3 meeting after choosing to leave the cash rate at its current record-low setting since August 2013.

Westpac, NAB and ANZ have recently forecast that rates will be cut in the first half of the year, although the Commonwealth Bank said rates would probably remain on hold during 2015.


Mr Bassanese said interest rates will remain on hold “for some time” even though the market has already priced in a 0.25 per cent cut.

“Despite further weakness in the Australian dollar, financial markets continue to speculate over a possible further cut to the official interest rate this year due to persistent soft Australian economic growth,” he said.

“The drop in oil prices and the strong gain in December employment… however, suggest the RBA is likely to remain on hold at least for the first few months of this year.”

Mr Bassanese also said that housing demand remains firm, although home building approvals appear to be peaking.

“Indeed, the overall economic outlook remains subdued, suggesting unemployment might well creep higher again in coming months,” he said.

“In the least, this suggests the RBA will leave interest rates on hold with a modest bias to ease.”

[Related: Interest rates about to fall, says leading analyst]