Shadow Board predicts RBA outcome

by AB05 Nov 2013

RBA Shadow Board members are predicting the official cash rate will remain unchanged following today’s meeting, with the balance of risks remaining largely unchanged from last month.

According to the MacroBusiness blog, domestic signs are ‘mixed’, with the Australian dollar remaining relatively high while real estate markets in major urban centres appear to be reacting to the low interest rate environment.

“Inflation is well within the target range, the unemployment rate fairly stable around 5.6%, consumer and business confidence continue to improve, if only marginally.”

The Shadow Board’s confidence in keeping the cash rate steady has strengthened, equalling 66% (up from 62% in October). As it stands, the probability of a rate cut equals 5%, while the probability of a rate hike has risen to 29%.

“At longer horizons the following picture emerges: the probability that the cash rate should remain at 2.5% is 34%. The need for an interest rate increase is estimated at 46% (47% in October), for an interest rate cut at 20% (23% in October). A year out, the Shadow Board members attach a 56% probability to the need for an increase in the cash rate (down from 58% in October) and a 23% probability to the need for a decrease in the cash rate (down from 25% in October).”