RBA to keep rates steady tomorrow, but not for long

by Julia Corderoy04 Jul 2016
Another cash rate is highly likely following Britain’s shock Brexit vote, however, the Reserve Bank is not expected to drop the rate when it meets tomorrow.

Thirty out of 31 economists and experts (97%) in the finder.com.au RBA Survey are predicting the cash rate will remain at 1.75% at July's RBA board meeting, to allow the Reserve Bank to adopt a “wait-and-see” approach to the federal election and Brexit decision.

“The RBA expressed comfort with current monetary settings after the June meeting and it's likely in wait and see mode regarding the risks posed by Brexit,” AMP chief economist, Shane Oliver said. 

More than two thirds (67%) of those surveyed believe the next cash rate cut will come next month, in August. Another 17% believe it won’t occur until November this year. 

“We expect the RBA will assess the next CPI figures due late July before considering any further rate cuts in August,” ME general manager markets, John Caelli said.

This expected cash rate cut may also be the last, with the majority (59%) of economists and experts surveyed forecasting the cash rate will fall no lower than 1.50% this cycle. 

Seven economists (24%) predict the cash rate will fall to 1.25% before an upturn.

A consumer poll by online property agency iBuyNew found two thirds (66%) of consumers believe the RBA will keep the cash rate steady at 1.75% until the end of 2016.

Only 23% of participants in the online survey think there will be further cash rate cuts while 11% are expecting official rates to rise again.

“With so much for the central bank to digest from the Brexit fall out and after an eight week federal election campaign which has proven to be inconclusive, it will be no surprise to see the RBA stay on hold in July,” iBuyNew CEO Mark Mendel said.

“It’s only two months since the RBA cut the cash rate to its historical low and they still have some room to move on rates going forward.”