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RBA holds fire, ignores high Australian Dollar at August 2017 meeting


dollar stop1The Reserve Bank left the official cash rate on hold at 1.50% at its meeting today.

The result was in line with economists’ expectations, with all 35 of the experts surveyed in the Reserve Bank Survey calling the hold correctly.

The RBA made its decision amidst conflicting economic indicators. The Australian Dollar has surged recently, sitting above 80 US Cents. The stubbornly high dollar could give the RBA reason to trim the official cash rate.

However, other economic indicators appear to reflect a buoyant economy that could see the RBA lift the official cash rate in the months ahead. Manufacturing activity lifted in July for 10th consecutive month. House prices also performed strongly, rising by 1.5% across capital cities for the month of July.

There’s a broad consensus among experts that the Reserve Bank’s next move will be up, with 87% of the experts surveyed by forecasting a return to a tightening bias for the RBA.

The RBA noted in the minutes of its July meeting that a “neutral” cash rate would be 3.5%, representing a potential of eight rate hikes. However, 69% of experts in the Reserve Bank Survey expect three or fewer rate hikes over the next two years.

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