Rates Likely To Remain Unchanged

The Reserve Bank is expected to leave interest rates on hold for at least another month.

AAP conducted a survey of 16 economists 14 of which felt that the RBA would leave the overnight cash rate at 3 per cent for the sixth month in a row following its monthly meeting on Tuesday. Two of the economists surveyed believe that the central bank could begin their first round of policy tightening this week as the economic recovery begins in Australia.

David de Garis senior economist of the National Australia Bank felt that the RBA would leave interest rates unchanged on Tuesday but that a rise was imminent.

The NAB is forecasting that the central bank will lift rates by 25 basis points at each of its board meetings in November, December and February.

Mr. De Garis also stated that it was not a matter of if but when interest rates would go up.

RBA is happy with economy

Governor of the Reserve Bank, Glenn Stevens told a parliamentary inquiry last week that stimulus in the marketplace provided by low interest rates would have to be unwound as the economy improved.

Mr. Stevens stated that the economy was more resilient than earlier predicted and the central bank had revised its growth forecasts slightly higher.

Mr. Stevens also felt that things were improving and that it was happening in other countries too.

Some believe rates will go up today

Economists at JP Morgan and RBS however predict that the Reserve Bank will lift interest rates by 25 basis points today.

JPMorgan economist Helen Kevans stated that recent data had included firm retail sales, rising prices for houses and equities and strong consumer confidence surveys would prompt the Reserve Bank to lift rates.

Mrs. Kevans felt that it did not justify rates at current emergency levels. As long as the economy still expands the RBA will have to lift the cash rate fairly soon.

Ms. Kevans expected the RBA to lift the cash rate by 1.25 percentage points to 4.25 per cent by June next year.

James McIntyre economist from Commonwealth Bank stated that any rate rise would leave the cash rate at levels that still supported the economy.