Interest rates to hold in April, despite pressure to cut

The Reserve Bank is likely to leave rates on hold again tomorrow for the 11th consecutive month, despite growing pressure for a rate cut.

A RateCity.com.au analysis of 26 key economic indicators shows that a higher Australian dollar, a dip in consumer confidence and a property market coming off the boil won’t be enough to prompt a rate cut this month.

Sally Tindall, money editor at RateCity.com.au, said that while Glenn Stevens was unlikely to fold to these pressures, Australia could see a cut to the cash rate within the next few months.

“While the RBA has maintained a clear easing bias for almost six months, it’s shown little inclination to actually go through with a rate cut,” she said.

“But if the Aussie dollar continues to climb the RBA could be forced to act on rates, potentially before the next Federal Election, which would be a windfall for the government.”

RateCity.com.au’s monthly cash rate analysis found a number of key economic indicators would add to the mounting list of reasons for a future cut.

“The Australian banks have caused the ASX plenty of pain over the last few weeks with the major bank’s share prices taking a significant hit on fears of rising bad debts,” she said.

“House prices are also off the boil, with small falls recorded in some cities, but the RBA is likely to want to see the longer-term trends settle before they cut rates again.

“Overseas, New Zealand’s decision to cut its cash rate to a record low of 2.25 per cent did prompt speculation the RBA would follow suit, but the outcome of the RBNZ’s move has been disappointing, putting those rumours promptly to bed,” Tindall said.

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