Experts bet on Melbourne Cup rate call

by Miklos Bolza07 Nov 2017
As the Reserve Bank of Australia (RBA) lines up for its November cash rate call today, finance and economics experts across the country have come together in consensus that the rate will remain on hold for another month.

If correct, this will mean the RBA will have kept the rate steady at 1.5% for 15 months running since rates were cut by 25 basis points in August last year.

All 30 experts in finder.com.au’s monthly RBA Cash Rate Survey expect the rate to remain on hold today with just six expecting a move in the next six months. Mortgage marketplace HashChing also conducted its monthly mortgage broker poll with over 95% of the 530 brokers surveyed predicting a hold call today.

While the economy is showing some promising signs, weak spots such as high household debt and weaker consumer confidence may cause the RBA to pause, said Chris Schade, investment manager at MyState-owned Tasmanian Perpetual.

“While it appears the economy is on the right track, the RBA will likely continue to hold the cash rate at 1.5% and allow the economy some more time to develop.”

An RBA rate hike will come in the second half of next year, he predicted.

Stephen Koukoulas, managing director of ‎Market Economics, had a different view.

“RBA will continue to ignore weak inflation and wage results and instead create a perception of concerns about financial stability. A rate cut is long overdue.”

The Australian National University (ANU) RBA Shadow Board also forecast a hold in rates, saying that a stronger economic outlook points to the next move being up.

“Favourable employment figures and an improving outlook for the global economy increase the likelihood that interest rates need to rise in the future. For this month the RBA Shadow Board continues to advocate a hold-and-wait policy,” said shadow board chair Timo Henckel.

The probability of a rate hike in the coming six months is 70%, down from 73% a month ago, while the odds that the rates will remain on hold is 24%, up from 21% in October. The probability of a rate cut remains steady at 6%.

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