RBA to adopt 'wait-and-see' stance on interest rates

Economists are very confident that the Reserve Bank (RBA) will keep the official cash rate at 4.75 per cent at its board meeting tomorrow (February 1st), a new survey shows.

The poll of 19 analysts by Reuters found that all respondents expected the central bank to keep rates steady tomorrow.

However, they all also predicted that the cash rate will be higher by the end of the year as the impact of the flood rebuilding effort is felt in the economy.

"Massive reconstruction work is also expected to fuel inflationary pressures in coming months," said Reuters.

"With the labour market at near full employment and business investment picking up steam, there is precious little spare capacity left in the economy, meaning the RBA will most likely still tighten later in the year."

Despite this, it was revealed that some economists do not expect interest rates to rise significantly this year, with some market players pricing in "a mere 20 basis points worth of tightening" over the next 12 months.

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