Rates could remain frozen for some time

by Julia Corderoy06 Aug 2014
Rates may be in for a long period of stability as the RBA has said inflation is unlikely to move anytime soon.

The Reserve Bank of Australia (RBA) decided to leave the cash rate on hold at 2.5% for the 12th consecutive month, in its board meeting yesterday.

This decision has come as no surprise. In the latest finder.com.au monthly Reserve Bank survey, all 20 of the economists surveyed unanimously predicted the RBA will keep the cash rate unchanged. 

In a statement made by governor, Glenn Stevens, he indicated that the RBA doesn’t have plans to change the interest rate in the near future. 

“In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.”

Stevens indicated that the Bank expected inflation to remain within the RBA's 2-3% target band for up to the next two years.

Economists have predicted there may be a move to increase the cash rate in 2015, according to the finder.com.au monthly Reserve Bank survey. It is expected to increase to a “new normal” level of 4%, according to money expert at finder.com.au, Michelle Hutchison.

COMMENTS

  • by MCC 6/08/2014 10:44:50 PM

    In relation to variable rates - I agree. However the pricing war by banks on 5 year fixed rates is almost too good to refuse, & bond yields are now strting to move up again of the back of the US Fed Reserve slowing the 'money printing'.