Interest rates not likely to rise next month

THE official interest rate is almost certain to stay on hold next month, economists say.

The Reserve Bank is again dubbing as appropriate its “mildly restrictive” policy stance, the Herald Sun reported.

TD Securities economist Roland Randall said the minutes from the Reserve’s board meeting this month – released yesterday – signalled there was “next to no chance of an interest rate hike in April”.

Commentary in the minutes on Australia’s investment prospects were “less ebullient than in previous comments”, Mr Randall said, indicating that rates would stay on hold.

But there were no surprises in the minutes, and rates were bound to climb later in the year, he said.

“We have a rate hike pencilled in for May. This also looks increasingly less likely.”

In the minutes, the central bank said economic data was reflecting the effect of the summer floods.

But the bank said it would look beyond the short-term effect of the flooding.

The economy appeared to be broadly growing at close to trend rate and the outlook for inflation in the year ahead was consistent with the bank’s 2 per cent to 3 per cent medium-term target, the RBA said.

The RBA left the cash rate unchanged at 4.75 per cent when it met this month.

“Members confirmed that the board’s approach would be to look through the temporary effects caused by extreme weather events and to continue to set monetary policy based on the medium-term outlook for growth and inflation,” the minutes said.

Reduction in coal-mining output in Queensland was likely to see growth cut by more than the RBA had forecasted last month, they said. “Coal shipments from Queensland ports had declined sharply in January, consistent with the (RBA) staff’s earlier expectations.

“The staff continued to expect that floods could take about half a percentage point of growth in each of the December and March quarters.”

JP Morgan economist Stephen Walters said the RBA was still likely to lift the cash rate in May.

Source: the Herald Sun .


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