Reserve Bank tipped to hold rates at first meeting

Reserve Bank tipped to hold rates at first meeting
Date of Publication: Monday, 04 February 2013 14:55

The Reserve Bank board is being tipped to keep interest rates on hold when it convenes on Tuesday for its first meeting of 2013.


Despite weaker prospects for the domestic job market, low inflation, and falling business confidence, it is expected that the Reserve Bank will be deterred from expanding monetary policy in Australia by the improving condition of major world economies.


Recent data from the ANZ job advertisements survey has shown a falling number of vacancies for the 11th consecutive month, as the downturn continues to restrict opportunities in the labour market.


Advertisements fell by 0.9% in January, which follows a fairly hefty 2.8% fall in December, survey figures showed.


Inflation was also weaker than expected towards the end of 2012, figures have shown.


The Australian Bureau of Statistics found that prices rose by just 0.2% in the final three months of the year, which contributed to an annual consumer price index measure of 2.2% (read more).


However, there are some signs that inflation is beginning to nudge closer to the centre of the Reserve Bank’s target of between 2% and 3%. Unemployment figures are predicted to remain stable.


ANZ’s head of economic and property research, Ivan Colhoun, said that he would be "very surprised" if the Reserve Bank dedicated to cut rates, adding that the principal indicators were not all leaning towards that outcome.


However, he implied that further monetary easing could be an option if the jobs market failed to improve in sectors other than mining.


"Giving that inflation is well behaved, if unemployment does continue to trend up, then there's no reason not to continue to ease," he said.


But it is thought that the RBA will be more reluctant to cut rates following signs of improvement in the US, Chinese and Eurozone economies.


Last month, major banks came under pressure to reduce home loan rates independently of the major banks, after it was revealed that they had withheld an average of 39 basis points since the Reserve Bank began cutting the central cash rate in November 2011 (read more).


Keith McDonald
Which4U Editor


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Monday, 04 February 2013 14:55
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