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RBA leaves rates unchanged
February 07, 2007 09:33am
HOME owners have been spared another rate rise today with the Reserve Bank of Australia (RBA) leaving official interest rates steady at 6.25 per cent.
The central bank last lifted the cash rate in November by 25 basis points - its third increase last year.
With inflation easing and consumption apparently moderating, the RBA may even consider a rate cut in the second half of the year, HSBC chief economist John Edwards said.
"Inflation has clearly moderated,'' said Mr Edwards.
"There are signs that business investment is slack; residential construction is slack; consumption is quite moderate and we have not seen the increase in exports volumes that were the basis of most forecasts of stronger output forecasts.''
All 17 economists surveyed by AAP last week expected the RBA to keep rates steady at yesterday's board meeting.
Citigroup economist Shane Lee, however, said there was a risk that rates could rise following the March quarter consumer price index (CPI) data due at the end of April.
"Depending on the indicator data between now and then, we could see a rate rise at the May board meeting.''
Mr Lee said that, beyond that, it became a bit sticky with the federal election due in October and the May budget.
"There is a precedent set where the RBA won't tighten monetary policy a few months before the election and a few months after the election because it politicises the Reserve Bank's role and the Reserve Bank does not want to get involved in politics,'' he said.
National Australia Bank (NAB) senior economist David de Garis said with inflation easing in the December quarter, as well as evidence that the 2006 rate hikes have had some impact on the demand for housing, the RBA will remain on hold for some time.
But Mr de Garis noted at the broader level of the economy, data has been reasonably robust.
"Yesterday's NAB fourth quarter business survey showed some overall rise in business conditions in the quarter with capital investment intentions for the year ahead showing some improvement as well,'' he said.
"With activity data generally remaining solid - including for the global economy - the RBA is expected to retain a soft tightening bias.
"If there was to be any change in rates in coming months, then it is more likely to be a rise rather than a fall.''
NAB's forecast is for slower domestic demand over the course of this year and some further easing in inflationary pressures.
"On that basis, we expect that the RBA will keep rates on hold throughout 2007,'' Mr de Garis said.
February 07, 2007 09:33am
HOME owners have been spared another rate rise today with the Reserve Bank of Australia (RBA) leaving official interest rates steady at 6.25 per cent.
The central bank last lifted the cash rate in November by 25 basis points - its third increase last year.
With inflation easing and consumption apparently moderating, the RBA may even consider a rate cut in the second half of the year, HSBC chief economist John Edwards said.
"Inflation has clearly moderated,'' said Mr Edwards.
"There are signs that business investment is slack; residential construction is slack; consumption is quite moderate and we have not seen the increase in exports volumes that were the basis of most forecasts of stronger output forecasts.''
All 17 economists surveyed by AAP last week expected the RBA to keep rates steady at yesterday's board meeting.
Citigroup economist Shane Lee, however, said there was a risk that rates could rise following the March quarter consumer price index (CPI) data due at the end of April.
"Depending on the indicator data between now and then, we could see a rate rise at the May board meeting.''
Mr Lee said that, beyond that, it became a bit sticky with the federal election due in October and the May budget.
"There is a precedent set where the RBA won't tighten monetary policy a few months before the election and a few months after the election because it politicises the Reserve Bank's role and the Reserve Bank does not want to get involved in politics,'' he said.
National Australia Bank (NAB) senior economist David de Garis said with inflation easing in the December quarter, as well as evidence that the 2006 rate hikes have had some impact on the demand for housing, the RBA will remain on hold for some time.
But Mr de Garis noted at the broader level of the economy, data has been reasonably robust.
"Yesterday's NAB fourth quarter business survey showed some overall rise in business conditions in the quarter with capital investment intentions for the year ahead showing some improvement as well,'' he said.
"With activity data generally remaining solid - including for the global economy - the RBA is expected to retain a soft tightening bias.
"If there was to be any change in rates in coming months, then it is more likely to be a rise rather than a fall.''
NAB's forecast is for slower domestic demand over the course of this year and some further easing in inflationary pressures.
"On that basis, we expect that the RBA will keep rates on hold throughout 2007,'' Mr de Garis said.
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