Economists unanimously tip rates to remain on hold until May: Bloomberg

Barring a global meltdown or significant deterioration in Europe, borrowers should not expect any interest rate relief from the Reserve Bank on March 6 or at the following monetary policy meeting on April 3, according to a survey of economists.

All 23 economists surveyed by Bloomberg expect the RBA to leave the cash rate on hold at 4.25% during the next two months.

A strong majority – 16 out of 23 – expect the cash rate to fall by 0.25% in May to 4%, including all the major bank economists, while 14 out of 23 expect a further 0.25% cut in June, taking the cash rate to 3.75%.

Only three out of 27 economists surveyed by Bloomberg ahead of the February rate cut correctly tipped the RBA to leave rates on hold – the others all forecast a rate cut.

In his latest RBA note, HSBC chief economist Paul Bloxham wrote that while the bank has long though the Australian economy is in pretty good shape, “we have been less comfortable about the global outlook.

“And despite better global data recently, particularly in the US, and the recent rally in markets, we still remain somewhat sceptical. We still think global weakness and the flow on to the local economy will probably see the RBA cut a bit further.”

The median forecast is for rates to finish the year at 4%, with the survey of economist responses ranging from 3.7% to 4%.

In the recently published February minutes, the RBA indicated that global demand would play a key role in future interest rate decisions.

And in a speech to the House of Representatives Standing Committee on Friday RBA governor Glenn Stevens said that the likelihood of lenders passing on rate cuts to consumers was also factored into rate decisions.

In his address Stevens said: “We repeatedly made clear that the shifting relationship between the cash rate and other [lending] rates in the economy is a factor the Board takes into consideration in setting the cash rate”.

 

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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