Cash rates to remain on hold until November: JP Morgan’s Stephen Walters

The Reserve Bank will leave the cash rate on hold at 2.75% until November, according to JP Morgan chief economist Stephen Walters.

Walters believes the dollar is key to the RBA making its next cash rate cut decision.

In newly published research, he expects the Australian dollar’s return to parity against the US dollar – making it harder for industries like manufacturing, tourism and retail – to be competitive will force the RBA to take the cash rate to a new record low of 2.5%.

As highlighted by other economists, Walters says tomorrow’s official capital expenditure figures will provide insights into the health of the overall Australian economy.

He also anticipates the unemployment rate rising while expecting GDP to be only 2.75% next year, reducing his earlier forecasts of 3.25% economic growth in 2014.

The latest Bloomberg survey has 10 out of 21 economists forecasting a cash rate of 2.5% in the final quarter of 2013 with Westpac’s Bill Evans tipping a cash rate of 2.25% and the remainder anticipating now rate cut this year.

Only two economists – Westpac's Bill Evans and AMP Capital's Shane Oliver – expect a rate cut in June.

Yesterday Citibank cut its five-year fixed-rate home loan to 5.35%.

These are the current lowest fixed and variable rates (as of May 28):

Lowest variable rate offerings:

Lowest one-year fixed-rate offerings

Lowest three-year fixed-rate offerings

*A comparison rate includes both the interest rate and the fees and charges relating to a loan, combined into a single percentage figure.