The Reserve Bank of Australia (RBA) has kept the official cash rate at record low of 2.5 per cent at its November meeting and confirmed its neutral policy bias. The decision was unanimously predicted by analysts amid expectation rates will not start to move higher until mid 2015.
RBA governor Glenn Stevens’ statement highlighted moderate growth in the global economy against a pick-up in volatility in some financial markets. In Australia Mr Stevens says the bank still expects growth to be a little below trend for the next several quarters.
Looking ahead the RBA believes continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. The central bank has again affirmed the most prudent course is likely to be a period of stability in interest rates.
Shane Oliver predicts "no change"
FNN asked AMP Capital Investors Chief Economist, Dr Shane Oliver about his expectations for rates: “Ahead of the November interest rate decision which will come as always, the first Tuesday in November, Melbourne Cup Day, I think the Reserve Bank will simply do what it’s done for almost the last eighteen months now, simply sit on their hands and leave interest rate on hold.
The reason being is that not enough has changed in the economy. The Reserve Bank has cut interest rates but it’s still unclear as to how that’s flowing through the economy, things are not collapsing so we don’t need more rate cuts but it’s still way too early to raise interest rates particularly with low inflation, the Australian dollar is still being a bit too high and uncertainty about the pace of growth in the economy.
I know a lot of people think, 'Well on Melbourne Cup Day, the Reserve Bank always changed interest rates'. Well they didn’t last year, and I think this year they’ll do exactly the same thing, no change.”
