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RBA to hold fire on rates

Staff Reporter 3 minute read

By: Jessica Darnbrough

The RBA will more than likely keep rates on hold when it meets next week, after better than expected inflation data.

According to ABS data, released yesterday, the Consumer Price Index (CPI) was lower than market expectations and offered no evidence of inflationary pressures getting out of hand.

Housing Industry Association chief economist Harley Dale said the data would suggest that the RBA will keep rates on hold in August – if not for the next few months.

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“It is appropriate that rates are kept on hold in light of mounting evidence that the new home building recovery will run out of steam and on-going uncertainty regarding the post-stimulus trajectory of the domestic economy.”

The headline Consumer Price Index increased by 0.6 per cent over the June 2010 quarter, compared to a market expectation for a 1 per cent rise.

The annual rate was 3.1 per cent – just outside the RBA’s target range.

Mortgage Choice chief executive officer Michael Russell said with core inflation only nominally outside the RBA’s target band, there would be little reason to lift the official cash rate over the coming few months.

“Consumer sentiment is still volatile so the Reserve Bank needs to do all that it can to protect the positivity of Australians. We cannot risk any deterioration in the confidence of everyday consumers and business owners, which will in turn have a negative effect on the economy,” Mr Russell said.

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"We have not yet seen the full extent of the impact of a quick succession of interest rates from October to May. Nor do we understand the impact of global economic turbulence that continues today."

RBA to hold fire on rates
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