Former RBA official points to interest rates reprieve

By Mozo ·

Interest rates are likely to remain on hold for the short-term, a former official at the Reserve Bank (RBA) has said.

In a research note obtained by Dow Jones Newswires, Paul Bloxham, chief economist at HSBC and a former senior manager at the RBA's research department, said that rates look set to stay on hold until at least the second quarter of 2011.

"Unless rampant inflation was clearly just around the corner – and there is no credible data to make this case – we believe … (there will be) no move in the short run," he said.

Mr Bloxham also referred to the "huge" economic impact of the Queensland floods, noting that the uncertainty caused by the disaster would make the RBA reluctant to act on rates when its board meets next week.

The comments come after Westpac chief economist Bill Evans predicted that the next official interest rate hike will not come until the September quarter of 2011, with stronger growth prospects in the second half of the year likely to be boosted by the flood rebuilding program.

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