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Rates on hold til May

Staff Reporter 4 minute read

Staff Reporter

Having left the official cash rate on hold yesterday, industry economists now predict the next rate rise will occur in May at the earliest.

According to the latest NAB monthly business survey, the Board was largely expected to leave the official cash rate on hold at 4.75 per cent yesterday, with the next rate hike occurring in the second or third quarter of the year.

And the recent flood disasters in NSW, Queensland and Victoria could postpone the next rate hike further still, as the economy attempts to rebuild and recover from the massive disruption.

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NAB chief economist Alan Oster said he expects the cash rate to peak at 5.25 per cent by August 2011.

“The RBA will be watching cost pressures during the reconstruction phase following the floods,” he said.

That said, Mr Oster doesn't expect cost pressures to grow too rapidly. If costs stay low, Mr Oster said the RBA would be forced to keep rates on hold for the foreseeable future, or at least until business confidence improves in the flood affected regions.

Unsurprisingly business confidence fell strongly in Queensland last month, dropping into negative territory.

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Rates on hold til May
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