Cash rate to remain on ice

by Julia Corderoy01 Sep 2014
Despite some concerns over the cash rate remaining at its record low, the Reserve Bank is predicted to keep the official cash rate on hold at 2.5% at its board meeting on Tuesday.
Predictions of when we might see the Central Bank tighten monetary policy have also been pushed back, as the high Aussie dollar weighs on economic growth.
All 25 of the economists and industry experts surveyed in the monthly Reserve Bank survey expect no changes to the cash rate. Twenty-four of those surveyed predict we will see a rate rise next year, while one economist expects the cash rate might see a rise by the end of this year, or just after. 
Of those expecting a hike next year, the majority (53%) are forecasting the rise will come in the second half of 2015, including economists from AAP, AMP, Bank of Queensland, Bank of Sydney, Heritage Bank, NAB, Financial Services Council and Westpac.
“...The near term outlook is probably already a little more upbeat than the Bank put forward in its most recent forecast. While there are clearly still risks – the labour market for example provides some counter-evidence – no shift in policy stance looks at all imminent." Bill Evans, chief economist at Westpac said.
While 40% say we could expect a rate hike in the first half of 2015, including economists from ANZ, Commonwealth Bank, Commsec, HSBC, ING Direct, ME Bank and St George Bank.
“...The Bank is trying to balance the strength of the housing and related sectors ... Equally it is mindful that any near term move in interest rates will see the AUD move higher. Over the first half of next year, and it will be an increase of 25 basis points..." ING Direct treasurer, Michael Witts said