May RBA Decision: Cash rate unchanged

• Official Cash rate remains at 4.75%
• Uncertainty abroad and Japan disaster cited
• Recent CPI spike to settle within target

The Reserve Bank of Australia announced today that it will be keeping the cash rate steady at 4.75% despite rising inflation.

The RBA’s decision is aligned with the ongoing strategy of strengthening the Aussie economy on the back of the recent local and regional natural disasters. Uncertainty in the EU as well as a levelling-out of employment growth were quoted by RBA Governor, Glenn Stevens as being “accommodative” to today’s decision.

But despite the interest rate freeze, many economists expect the cash rate increase in the near future.

According to Paul Bloxham, a former Reserve Bank economist, last week’s CPI numbers were “the beginning of the upward swing of inflation”, and we should expect the cash rate to increase around the start of the third quarter.
“We expect that the next rate rise will be in July or August and that we’ll get another 50 basis points this year, by the end of this year,” he said.

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