The RBA has held interest rates steady despite the global market volatility and a dovish monetary decision by the US Fed in September.
UBS chief economist Scott Haslem said the RBA is confident the Australian economy is rebalancing moderately, and that signs of improvements are coming through.
“The [Australian] currency has also adjusted quite significantly, so I don’t think conditions are bad enough to cut what are already record-low interest rates,” Mr Haslem said.
The ANU Centre for Applied Macroeconomic Analysis (CAMA) Shadow Board attached a 72 per cent probability to a two per cent cash rate being the ‘correct’ setting.
When it comes to longer-term probabilities for the ideal monetary policy, CAMA Shadow Board put a two per cent cash rate at 25 per cent (down from 27 per cent in September).
“The estimated need for an interest rate increase lies at 62 per cent (65 per cent in September), while the need for a rate decrease is estimated at 13 per cent (8 per cent in September),” said a CAMA statement.
“A year out, the Shadow Board members’ confidence in a required cash rate increase equals 68 per cent (6 percentage points down from September), in a required cash rate decrease 14 per cent (9 per cent in September) and in a required hold of the cash rate 18 per cent (unchanged).”
