Interest rates expected to stay on hold until end of 2010

Friday 30 July 2010

Article by Mozo

There is unanimous agreement among Australia’s leading economists that official interest rates will remain on hold until the final quarter of the year, new research suggests.

In a survey of 11 economists by the AAP, all said they expect the Reserve Bank of Australia (RBA) to leave the overnight cash rate at 4.5 per cent for a third consecutive month when it meets on Tuesday (August 3rd).

All of the economists also forecast that the September quarter will be free of rate rises.

The news comes after data released earlier this week showed that underlying inflation was at a lower-than-expected annual rate of 2.7 per cent in the June quarter.

Interest rate changes are used by the RBA to keep inflation between two and three per cent over the economic cycle.

The new figures therefore strongly point towards rates staying on hold next week.

"We thought the CPI report this week would be the tipping point for August. Obviously it’s not, and given that, the rest of the economy is going to stay the same," TD Securities senior strategist Annette Beacher told the AAP.

"So the RBA knows that employment is strong and that the terms of trade are rising, so none of those are tipping points."

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