Reserve Bank announces cash rate decision

The Reserve Bank of Australia has announced where it stands on the official cash rate after its second board meeting for the year.

As widely predicted, the Reserve Bank has kept the official cash rate on hold at two per cent in its March board meeting.

Out of the 31 economists and commentators surveyed by comparison website finder.com.au only one had predicted otherwise, with the rest predicting that rates would remain on hold.

Twenty-three per cent of those surveyed believe a rate rise is on the cards in 2016, while 48 per cent say it won’t happen until next year.

Forty-five per cent of experts surveyed believe Australia is at the bottom of the interest rate cycle, while 26 per cent are forecasting one further rate cut to 1.75 per cent.

BIS Shrapnel associate director of economics Richard Robinson, who predicted rates would remain on hold, said although economic growth is below trend, it is still holding, with enough positives to outweigh the negatives.

“Confidence rebounded in February, so consumers are not panicking, and households will continue to spend, albeit with modest growth,” said Mr Robinson.

“The Reserve Bank remains open to the possibility of reducing interest rates, but is only likely to do so should the economic situation internationally deteriorate further,” Housing Industry Association senior economist Shane Garrett said.

AMP Capital’s chief economist Shane Oliver said recent Reserve Bank commentary suggests a degree of comfort with the current level of the cash rate and while it retains an easing bias not enough has changed to suggest it is about to act on it.

“It’s basically in wait-and-see mode regarding the jobs market and the potential impact of global financial turmoil,” said Mr Oliver.

 

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