Experts Believe RBA Will Retain 3.25% Cash Rate
By Vittorio Hernandez | November 6, 2012 9:38 AM EST
Experts believe that the Reserve Bank of Australia (RBA) will retain the current 3.25 per cent overnight cash rate when the central bank's monetary committee meets on Melbourne Cup Day on Tuesday, Nov 6.
This, despite six members of a nine-member shadow RBA board of News Limited believing a rate cut is needed, while two share the experts' sentiment that it should be held and one even is in favour of a rate increase.
Economic data that came out Monday indicated a rate reduction is warranted.
If the experts' opinion holds, it would be the first time in six years that RBA Governor Glenn Stevens will not deliver a Cup Day rate change. Since he assumed leadership of the Australian central bank, Mr Stevens had made two Cup Day rate cuts, the first in 2008 and the second in 2011.
They pointed out that since Mr Stevens made a surprise rate cut in October, he has the luxury of holding off another rate cut until stronger local or global conditions require one.
Paul Bloxham, chief economist at HSBC and shadow RBA board member, said he opted for a rate cut to ensure a smooth rebalancing from a mining-driven growth to a consumer- and housing-driven growth. Another shadow board member and Bank of America Merrill Lynch chief economist Saul Eslake agreed with Mr Bloxham that the RBA should reduce the key lending rate to ensure sectors of the Australian economy that are sensitive to interest rate movements are well placed when the investment phase of the resources boom starts to wind down.
Despite the Monday report of the falling job ads, analysts agree that the RBA monetary policy decisions are based on conditions in the past six months, not just a day prior.
"The RBA should cut the cash rate . . . it has just six months to create momentum in the economy sufficient to offset falling mining investment. There are few green shoots in retail, and stabilised housing prices, but beyond that not enough is going on. With an overvalued currency and a government hell-bent on surplus, lower interest rates are the only lever left to pull," wrote Macro Investor editor David Llewellyn-Smith in The Sydney Morning Herald.
To contact the editor, e-mail:
Most Popular Slideshows
- Pope Francis Meets Sudanese Woman Who Was Spared Death for Apostasy (PHOTOS)
- Malaysia Airlines Flight MH17: King Williem-Alexander, Queen Maxima Hold Solemn Reception Ceremony for Victims
- Jennifer Lawrence & Nicholas Hoult Allegedly Split: Mad Max Actor Cheats with Kristen Stewart & Riley Keough - Reports
- Transfer News: FC Barcelona Shockingly Sign Valencia Defender [PHOTOS]
Join the Conversation
- Malaysia Airlines Considers Changing Name After MH370 and MH17 Tragedies
- Fast Food Meat Scandal: McDonald’s Suspend Nuggets and McSpicy Chicken Filets
- Air New Zealand Flies Boeing 787-9 Dreamliner
- Solution to Your Old Unwanted Phones Comes with MobileMuster Scheme
- IBM Named Leader in Worldwide Managed Security Services
- Apple iPhone 6 on Two Confirmed Release Dates, New Parts Leaked Suggesting Bigger iPhone to Come
- Google Nexus 6, 8 with Android L on Release Date Promises Killer Mobile Device Experience
- Xiaomi Mi4 vs OnePlusOne vs Nexus 5: Mi4 is the ‘Perfect’ Phone
- Israeli Women Stripping Naked for IDF Soldiers
- HTC One M8 Android 4.4.3 KitKat Update Roll Out, Introducing the HTC One Remix
- iPhone 6 Release Date Relevance to iOS Newbies: Specs Meaning, Price Considerations
- Shocking Video of Pedigree Dog Culling in Bali Emerges [Video]