RBA predicted to keep rates steady…for now

by Miklos Bolza04 Oct 2016
Forecasts by the nation’s leading economists unanimously see the Reserve Bank of Australia (RBA) holding its current cash rate of 1.50%.
The most recent finder.com.au RBA Survey found 100% of the 33 experts surveyed tipped the cash rate to hold for October 2016.
However, there may be more movement to come before the end of 2016 with 33% of economists predicting a cut in the next few months.
The majority of these (24%) said the cut would occur in November while 9% expected it to occur in December.
“Not enough has changed since the last rate cut in August and the RBA is likely waiting until the September quarter CPI release prior to the November meeting before deciding to move again,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.
Looking forward into 2017, most surveyed experts predicted the rate would fall with 39% expecting it to drop in the first six months of 2017 and 15% forecasting it would drop later on.
Only 27% of all economists surveyed said the rate would increase past October 2017.
“We don't think the changing of the guard at the RBA alters in anyway the future path of monetary policy, but the board will be happy to sit tight for now, and monitor incoming data before making a cut in either late 2016 or Q1 2017,” said Jordan Eliseo, chief economist of ABC Bullion.
Matthew Peter, chief economist at QIC echoed this noting that with markets taking recent US Fed and Bank of Japan decisions in their stride, the RBA will remain on hold for the rest of the year.
 “In the new year, it must weigh up developments in domestic inflation and the exchange in its decision to stay on hold or whether to cut again by 25bps,” he said.
When asked how low they predicted the rate to fall this cycle, 69% of economists expected a drop to no lower than 1.25% while 24% forecast a low of 1%.
Only 7% of experts expected the rate to fall even lower.