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RBA ‘not too fussed’ on raising rates in 2018

RBA ‘not too fussed’ on raising rates in 2018

Borrowers can breathe a sigh of relief, according to one prominent economist, who believes the Reserve Bank is unlikely to break its run of record-low interest rates until the first half of next year.

For a record 18 consecutive meetings, the central bank left cash rates on hold at 1.5 per cent for April, surpassing a previous record of 17 meetings in the mid-1990s.

AMP Capital’s chief economist, Shane Oliver, can’t foresee conditions triggering a change in the cash rate for the rest of 2018.

“On the one hand the global economy is strong, the RBA does not appear too fussed about recent share market volatility, the risk of a trade war and higher bank funding costs (albeit it's keeping on eye on these issues), business conditions are strong and employment growth has been strong and the RBA continues to expect a pick-up in growth and inflation,” Mr Oliver said.

“But against this is the uncertainty around the outlook for consumer spending, labour market spare capacity remains high, wages growth remains low (although it may have troughed), inflation remains low and measures by APRA to tighten lending standards have helped cool the Sydney and Melbourne property markets. So, it makes sense to remain on hold,” he said.

In its forecast for 2018, NAB suggested that interest rates would rise twice this year: first in August and then again in November.

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However the RBA itself has said it is in no hurry to raise rates until wages growth picks up and household debt eases back, both of which are needed to boost consumer purchasing power.

The central bank also said it would not be driven by other countries raising their own interest rates, stating that domestic conditions are its core focus in determining the appropriate setting.

RBA ‘not too fussed’ on raising rates in 2018
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