RBA Expected to keep home loan rates unchanged

The RBA is widely expected to keep interest rates unchanged at 4.50% at its July meeting. With recent market edginess reinforced by this week’s dataflow showing a slowing in global (and Australian) growth momentum, it is likely that the RBA will retain a degree of cautiousness. Indeed, with the Australian economy currently taking a breather as activity adjusts to the 150bps of policy tightening since October 2009, we believe the RBA will remain comfortable with rates at 4.50% for some months. However, over the longer term, the risks to the inflation outlook remain to the upside, particularly due to the forecast boost to income flows over coming quarters as a result of a stronger terms of trade. As such, we forecast rate hikes towards the end of the year will see the cash rate reach 5% by December.

Source ANZ Economics



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