Rates still don't budge

The RBA has again chosen to remain on the sidelines, but inflation data could eventually force the Central Bank's hand



The Reserve Bank has left the cash rate untouched for the eighth consecutive month, amid some positive economic data.

At its April meeting today, the RBA left the cash rate unchanged at 2.5%. RBA governor Glenn Stevens said financial conditions in the Australian economy were "overall accommodative".

"Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago."

But economists have predicted the Reserve Bank could begin tightening later this year. The TD Securities Melbourne Institute monthly inflation gauge rose by 0.2% in March and by 2.7% in the 12 months to March, a similar pace to February.

TD Securities head of Asia-Pacific research Annette Beacher said the Bank could begin tightening later in the year as inflationary pressure grows.

"We see the August monetary policy testimony as the perfect timing to announce that emergency cash rates are no longer required, paving the way for at least one small upward adjustment by year end.”

Keep up with the latest news and events

Join our mailing list, it’s free!