RBA Cash Rate Target Announcement – June 2014

RBA continues to hold rates at 2.50%.

RBAJune

The RBA have continued their ‘wait and see’ policy by keeping the cash rate unchanged at their meeting this afternoon.

The decision was largely expected by commentators and economists, with the ASX Rate Indicator putting the chance of a rate cut at only 2% yesterday.

Governor of the RBA Glenn Stevens repeated previous sentiments saying that "the most prudent course is likely to be a period of stability in interest rates".

"Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time."

All of finder.com.au’s 16 expert commentators correctly forecast the rate to remain on hold for this month.

As was the case last month, many of them see the rates changing in the first quarter of 2015.

“...I think the Reserve Bank will be quite happy to sit tight and at this stage, they might be sitting tight well into next year,” Shane Oliver of AMP said.

Glenn Levine from Moody’s Analytics believes that without macroprudential regulation, which he views as unlikely, rates will rise in March next year.

“One factor to watch is whether the RBA imposes some sort of macroprudential requirement. We think this is increasingly likely,” Mr Levine said.

“The economy is too weak to withstand tighter monetary policy but the housing market is heating up and could develop into a risk for the mortgage and banking sectors. Without any macroprudential moves the RBA will hike rates around March 2015. With some sort of macroprudential restriction, such as the mooted more stringent lending requirements, it pushes the initial rate rise out another six months.”

Forecast of the month - Shane Oliver

Title

Nothing's really happened. The Reserve Bank has cut interest rates to these record lows, and that has had an impact on the economy, housing activity is picking up and spending is picking up.

Against that, though, the improvement in the economy beyond housing and consumer spending has been very tentative, and of course the upset around the budget. So on the one hand, there has been time to be improved, but at this stage there won't be a rise until the Reserve Bank feels the economy is back onto a certain footing again.

At the same time the inflation rate remains a bit high, and wage growth is extremely weak, it's at the lowest it's been in the history of the period. So given this combination of a somewhat still uncertain economic outlook, at a time where inflation is still low, I think the Reserve Bank will be quite happy to sit tight and at this stage, they might be sitting tight well into next year.

Read all of finder.com.au's expert cash rate forecasts

Marc Terrano

Marc Terrano is a content marketer manager at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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