RBA tipped to keep rates on hold today but further cuts to come

Economists do not expect the Reserve Bank to cut interest rates today but say an interest rate cut is on the horizon.

The RBA meets this morning and an announcement will be made early this afternoon on whether there will be a rate cut or interest rates will be maintained at 3%.

Alan Oster, chief economist for the National Australia Bank, told SmartCompany he does not expect a rate cut today.

“The RBA is in a holding pattern for a while and it is waiting to see whether what it has done in terms of rate cuts already is enough, I think that will take some time,” he says.

“There is still another rate cut out there, in about June, as the economy is still quite soft and in those circumstances we think unemployment is going to start heading north, and a rate cut is about all they can do.”

Oster predicts the June rate cut will be .25% and thinks there will be one other rate cut before the end of the year.

“The RBA still thinks things have improved a bit recently and there are some green shoots, for example in the housing industry and the equity market,” he says.

“But we don’t see those green shoots anywhere else.”

Katie Dean and Justin Fabo of ANZ also expect the RBA to maintain the status quo and keep the cash rate unchanged at 3%.

“With no change in the cash rates likely, the surprise would be any change to the RBA’s dovish stance,” Dean and Fabo said in a monthly statement from ANZ.

“We expect this is unlikely, given weak local business conditions.

“February data on building approvals and retail sales are both out on Thursday; these data will provide insight as to whether the recent pick up in momentum in interest rate sensitive sectors has been sustained.”