What can we expect from the March Reserve Bank announcement?
Interest rates have been at rock bottom for some time now, but it seems that the RBA will be playing a waiting game as far as any further moves are concerned.
At last month’s meeting, the Reserve Bank board opted to play it safe amidst turbulent global conditions and keep the cash rate steady at 1.50%. The next move is largely expected to be an increase - although Mozo’s Product Data Manager Peter Marshall said it's pretty clear rates aren't on the move for March, or anytime soon for that matter.
“Things were on edge at the end of last year, but they’ve firmed up now,” he said.
“I still don’t expect the RBA to make any move - particularly a rate cut - unless it’s absolutely necessary, and at the moment, there’s no strong case for it. I would say the next move will be a rate increase sometime late this year or early next.”
RELATED: ANZ ditch AMEX companion cards: the beginning of the end?
There have been a number of indicators that mean the Reserve Bank will likely be happy to sit still for a while to come, including a strong GDP, positive current account deficit numbers and continuing upward pressure on house prices.
Economic indicators from the US are also improving, and if the US Federal Reserve makes a move to raise rates, the Australian RBA will have room to do the same without risking an undesirably strong Aussie dollar.
“But that could also be a long time coming, as it might be another six months before the political and economic situation settles enough for the US Fed to move,” Marshall added.
RELATED: Average savings account interest rate has dropped to 1.88%
Marshall said that whether or not the RBA changes the cash rate in March, there’s likely to be more interest rate movement from banks in the near future.
“I wouldn’t be at all surprised to see more out-of-cycle rate hikes from banks. There’s still very strong growth in loans at the moment, so there’s little risk of banks pricing themselves out of the market by increasing rates,” he said.
It’s not looking good for savers either - Marshall said some of the better offers that have been available for sometime have recently been cut, including a 15 bp cut to NAB’s Reward Saver and a 25 bp cut on the Express Saver from Queensland mutual bank, Move.
In order to get the best value for their money, Aussies should regularly review their financial situation and make sure they’re signed up to the best offers around. To check if your home loan is the best value option, you can use our mortgage comparison tool. And savers can search our comparison table for the best value savings accounts.