Stephen Koukoulas - Rates On Hold
The monthly meeting of the RBA Board on Tuesday is almost certain to leave official interest rates on hold at 1.5 per cent, a rate first reached in August 2016.
The pressure is roughly evenly divided about the direction of the next move with a slight bias in market pricing towards a cut. Rising unemployment and confirmation that underlying inflation is well contained are suggesting lower official interest rates: improving global economic conditions and still buoyant house prices in Sydney and Melbourne are suggesting higher interest rates.
While there is such a push and pull on the key economic data, the best decision for the RBA Board is “rates on hold” even though the market is pricing in a slight (15 per cent) chance on an interest rate cut before year end, and for the risk of interest rate rises during 2018. Perhaps the best bet is rates on hold for a year or more.
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