The Reserve Bank of Australia has kept the official cash rate on hold for the 14th month in a row, but the case for a hike is starting to build.
The RBA elected to keep the official cash rate on hold at 1.5 per cent at its October meeting this afternoon.
The decision did not come as a surprise, with the ASX futures market pricing in a 100 per cent chance of 'no change' to the RBA cash rate in October.
In its October statement, the ANU-based RBA Shadow Board said the case for an increase to the cash rate in the future is building – citing favourable employment figures and an improved outlook for the Australian economy.
However, the RBA Shadow Board continued to advocate a 'wait and see' policy, attaching a 60 per cent probability to 1.5 per cent being the 'correct' monetary policy setting.
"The probabilities at longer horizons are as follows: six months out, the estimated probability that the cash rate should remain at 1.50 per cent equals 21 per cent, 3 percentage points lower than in September," said the statement.
"A year out, the Shadow Board members’ confidence that the cash rate should be held steady equals 15 per cent (16 per cent in September)."
Stimulate new ideas. Stimulate new thinking. Top up your CPD and hear from industry experts with InvestorDaily’s Knowledge Centre. Keep up to date with the latest trends and reforms, all while adding to your CPD. Explore the knowledge centre Knowledge Centre now.
Despite the Australian economy’s ongoing rapid recovery, an Australian equity head believes GDP growth will “fade” in 2022. ...