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Cash rate call revealed as predictions of cut heat up

RBA

Australia’s leading economists predicted an imminent rate cut in the lead up to the Reserve Bank’s monthly board meeting, the outcome of which has just been released. 

The RBA has held the official cash rate at a record low 1.5 per cent for the 33rd month in a row.

Top experts believed the RBA would hold the cash rate this month, with comparison site Finder stating that 75 per cent predicted a hold in the cash rate.

Tim Moore from Credit Union Australia was not surprised by the RBA’s decision.

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“RBA will shift to an easing bias. Whilst CPI came in below expectations and moving away from the RBA target range, until we see weakness in the employment data, we believe the RBA will remain on hold,” said Mr Moore.

Experts who were in favour of a rate cut suggested that weak inflation figures released in March would lead to a reduction in the cash rate. AMP’s Shane Oliver believed the RBA should have lowered the cash rate.

“Rate cuts were already on the way thanks to slower economic growth and the downturn in the housing cycle, but weaker than expected underlying inflation in the March quarter argues that the RBA should move sooner rather than later,” said Mr Oliver.

What’s next for investors?

While the cash rate was unchanged today, Finder’s Graham Cooke believes a cut will occur in the foreseeable future.

“The latest 0 per cent inflation results may have far-reaching implications for our economy. While the results came as a bit of a surprise to our panel, flat inflation will be a huge worry for the RBA, who is aiming to keep inflation between 2 per cent and 3 per cent.

“Irrespective of May’s decision, the majority of experts (84 per cent, 32/38) expect at least one cut by August and many expect another cut after that – meaning a cash rate of 1 is per cent in sight,” said Mr Cooke.

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Cash rate call revealed as predictions of cut heat up
RBA
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