RBA leaves rates on hold

The Reserve Bank has decided to leave the official cash rate on hold at 4.75 per cent.

A raft of less than stellar economic data forced the RBA to leave the cash rate unchanged at its third consecutive board meeting earlier today.

Yesterday, HSBC economist Paul Bloxham said it was unlikely that the RBA would lift rates any time soon as the risks to inflation are almost all to the upside.

“HSBC believes rates will remain on hold next month as well. We still expect the next move around mid-year – with May or June pencilled in as most likely – though we are watching the labour market carefully to pin down the timing,” Mr Bloxham said.

“We expect the unemployment rate to drift into the 4’s in coming months, and view this as a necessary condition for a mid-year rate move. We still expect a total of 50 basis point of tightening this year and another 50 basis point in the first half of next year, with the cash rate to peak at 5.75 per cent in mid-2012.”

Source: Real Estate Business (2011) http://www.realestatebusiness.com.au/breaking-news/3645-rba-leaves-rates-on-hold

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