Reserve Bank expected to hold back on rate rise for April

It would appear that the many economists who have decreed that borrowers can breathe easy until later this year when it comes to the Reserve Bank pulling the interest rate lever will be proven right…at least when it comes to next month’s meeting of the Central Bank anyway.

In a Herald Sun report, TD Securities economist Roland Randall said the RBA’s recently released minutes from their March meeting indicate that there’s, “next to no chance of an interest rate hike in April”.

He noted that commentary in the minutes on Australia’s investment prospects were “less ebullient than in previous comments”, indicating that rates would stay on hold, and said a rise was likely later in the year.

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

The RBA said current economic data was reflecting the effect of the summer floods, but that they would look beyond the short-term impact of this natural disaster.

Taking a broader monetary view, the Central Bank minutes went on to report that the economy appeared to be growing at close to trend rate and the outlook for inflation in the year ahead was consistent with the bank’s 2 to 3% medium-term target.

“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.

The RBA took into account a reduction in coal-mining output in Queensland, which was likely to see growth cut by more than they had forecasted last month.

“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.”


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