RBA Expected to Keep Rates Steady Next Week

The Reserve Bank is unlikely to cut rates further next week as it balances the need to boost economic growth while keeping Sydney and Melbourne house prices under control.  Market pricing for a June rate cut has remained at just four per cent this week, despite Thursday’s downbeat capex data which showed business investment slumped in the March quarter, and will likely fall further in the coming financial year.

All 12 economists surveyed by AAP expect the cash rate to remain steady on Tuesday, but 10 of them tip a move by the end of the year.  JP Morgan economist Stephen Walters said it was almost certain the RBA would keep rates steady on Tuesday, given May’s 0.25 percentage point cash rate cut.  The Reserve Bank cut rates to an historic low of two per cent on May 5, citing factors including weak business investment and slowing Chinese growth.

“No surveyed economist expects a rate cut next week and futures market pricing implies only a negligible chance of a move,” Mr Walters said.  “Having trimmed the cash rate only a few weeks ago … officials probably are content for now to be inactive, as they assess the impact of this years policy action.”