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RBA expected to keep interest rates on hold tomorrow

Mortgage owners can breathe a sigh of relief with the Reserve Bank unlikely to raise interest rates above the current 4.5 percent in the RBA’s monthly board meeting tomorrow.

Reserve Bank of AustraliaThe minutes of the last month’s May 4th meeting of the RBA indicate that board members are satisfied with the current cash rate in the short term.

With last month’s increase of a quarter of a per cent – the sixth straight since October – the RBA has achieved its goal of stabilising interest rates to “around the average levels over the past decade.”

Borrowers can expect to be given a rest this month, as the minutes show that RBA board members felt the rise in May would be sufficient to steady the economy to desired levels.

The minutes note that “if lenders responded as expected to another rise in the cash rate, interest rates faced by most borrowers would then be at around their average levels over the past decade. Members felt that this would leave monetary policy well placed for the present.”

The release also reveals the board’s considerable discussions on the issue of Greece and the European financial situation.

Given the further deteroriation of the economy of the eurozone and the bailout of Greece, it is unlikely that the Reserve Bank will increase rates with such economic uncertainty looming.

The Australian reports that both Macquarie Bank and AMP Capital Investors predict rates will stay on hold for the near term.

“The Reserve Bank has completed part one of its tightening cycle,” Rory Robertson interest-rate strategist for Macquarie Bank said in the paper.

AMP Capital Investors chief economist Shane Oliver felt similarly, “We expect the RBA to leave rates on hold as it has achieved its short-term objective of returning bank lending rates to around their longer-term average,” he said in The Australian.

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David Olsen

David Olsen

An undercover economist and a not so undercover geek. Politics, business and psychology nerd and anti-bandwagon jumper. Can be found on Twitter: <a href="http://www.twitter.com/DDsD">David Olsen - DDsD</a>

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