The RBA’s decision to keep interest rates on hold is in line with the expectations of the market.
QIC chief economist Matthew Peter said that having failed to cut interest rates in November, the RBA will “sit and wait” for global and domestic developments.
“A February rate cut is still an option if global conditions deteriorate (especially if the Fed delays lift off),” Mr Peter said.
The ANU Centre for Applied Macroeconomic Analysis RBA Shadow Board ascribed a 67 per cent probability to 2 per cent being the ‘appropriate policy setting”.
“Headline inflation, at 1.5 per cent (year-on-year) below the RBA’s target band of 2-3 per cent, remains well contained and GDP growth, at 2 per cent annualised, soft,” said the Shadow Board statement.
“The CAMA RBA Shadow Board on balance prefers to keep the cash rate on hold, attaching a 67 per cent probability to this being the appropriate policy setting.
“The confidence attached to a required rate cut equals 22 per cent, down four percentage points from the previous month, while the confidence in a required rate hike has risen slightly to 11 per cent,” said the statement.
