RBA surprises market by keeping rates on hold

By Mozo ·

The Reserve Bank of Australia (RBA) has surprised many economists by keeping the official cash rate on hold at 4.5 per cent for a fifth consecutive month today (October 5th).

However, in a statement announcing the decision, RBA governor Glenn Stevens confirmed the likelihood of future rate rises.

"If economic conditions evolve as the board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target," he said

Mr Stevens said he expected inflation to remain within the RBA's target band of two to three per cent over the near term.

There had been speculation that a rate rise by the central bank would prompt lenders to hike their own rates independently in a bid to deal with funding pressures.

Speaking to news.com.au after today's announcement, RBC Capital Markets economist Su Lin Ong suggested borrowers would have to wait and see how the banks responded over the next couple of days following the RBA's decision to keep the cash rate on hold for another month.

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