Reserve Bank leaves interest rates unchanged

The Reserve Bank has left interest rates at a record low of 1.5 per cent, unchanged for the 20th month in a row.

The decision on the cash rate was announced on Tuesday afternoon, after the RBA’s monthly board meeting.

Most economists had predicted the lack of change, with financial markets generally tipping the cash rate to remain at its record low until 2019.

However, the Australian National University’s so-called “shadow RBA board” – made up of economists, academics and former central bank board members – has said it considers there is a 73 per cent probability of an increase in the next six months.

The Organisation for Economic Co-operation and Development last week predicted a move by the end of this year, on the basis of inflation and wages picking up.

Such expectations come ahead of what could be a strong economic growth result when the March quarter national accounts are released on Wednesday and a sharp rebound from a disappointing final few months of 2017.

New figures released on Tuesday showed exports will contribute 0.3 percentage points to growth in the quarter, after a hefty revised contraction of 0.65 basis points in the December quarter.

Government investment is also expected to add about 0.4 percentage points to growth.

Economists were largely sticking to their earlier forecast of a 0.8 per cent growth expansion in the economy in the March quarter, double the rate of the previous three months.

This would lift the annual rate to 2.7 per cent from 2.4 per cent.

However, following Tuesday’s data, Westpac economists upgraded their forecast to a quarterly rise of 1.1 per cent to an annual rate of 3 per cent.

Source: The New Daily

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