RBA set to leave cash rate at 1.50%

The Reserve Bank of Australia will leave the cash rate at a record low of 1.50 per cent when it meets tomorrow.

RateCity.com.au’s analysis of 22 domestic and economic indicators found 17 were pointing to the RBA leaving the cash rate on hold, where it has been since August 2016 (see Rate Forecaster below).

RateCity.com.au money editor Sally Tindall said there was no compelling reason for the Reserve Bank to change monetary policy.

“The RBA would like to hike rates, but the high Australian dollar, combined with low wages growth and low inflation, will keep rates grounded in the short term,” she said.

“The economy is moving steadily rather than spectacularly, so the logical option is for the board to hold fire until there are major changes in the key economic indicators.

“This means the RBA is currently playing a waiting game. They won’t want to move rates until families get some relief from the current cost-of-living pressures. With little relief in sight, they’re likely to hold off until next year.

“The other complicating factor is that the banks already increased rates in the first half of this year so we’ve actually experienced an unofficial tightening of monetary policy, despite no official change in the cash rate,” said Ms Tindall.

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