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Rates steady at 2pc, economists forecast

by Reporter10 minute read
The Adviser

Experts have come to a unanimous agreement that the Reserve Bank of Australia will leave the official cash rate on hold at today’s monthly board meeting.

According to a survey by comparison website finder.com.au, all 33 participants – made up of economists and commentators – expect interest rates will remain at the record-low two per cent.

Many of those surveyed cited a need for the Reserve Bank to continue to take a 'wait and see' approach as to what impacts the recent May rate cut will have on the economy.

The current unemployment rate, higher housing costs and financial pressures from overseas were other factors associated with the Reserve Bank’s expected decision for a rate pause.


“The Reserve Bank is in between a rock and a hard place on this now, with a weak economy and property prices starting to bubble in some areas,” Griffith University associate professor Mark Brimble said.

“Ideally it needs the currency to do the work for it, but this is remaining stubbornly strong. This continued uncertainty in Europe and Asia, and expectations of a rate rise in the US later this calendar year, [will mean] the Reserve Bank is likely to sit on its hands.”

Looking ahead, the survey found that 12 of the 33 experts believe the cash rate will fall further by the end of the year. Out of those 12, five experts forecast a drop in August or September, while the remaining seven expect to see the cash rate fall in the last quarter of 2015.

Two experts predict the cash rate to rise this year, while the majority (18) believe the cash rate will start to rise next year, and 13 experts predict the cash rate will increase after 2016.

This survey comes after The Adviser conducted its own straw poll of 517 brokers on their cash rate predictions.

According to the poll, 50.7 per cent of respondents believe the cash rate will drop to 1.75 per cent at the end of the year, while 28.2 per cent predict it will remain at 2.0 per cent.

Of the remaining respondents,14.9 per cent expect the cash rate to rise to 2.25 per cent, while 4.8 per cent listed their expectations as “other”, indicating an even greater fall or rise.

[Related: Economist forecasts cash rate to fall by 0.75pc]