Further rate cuts unlikely - economists
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AAP
2012-08-21
Mortgage holders hoping for further interest rate cuts are likely to be disappointed if the minutes to the Reserve Bank of Australia's (RBA) latest monthly board meeting are anything to go by.
The minutes of RBA's August 7 board meeting, released on Tuesday, show that signs of improvement in both the local and Chinese economies contributed to the central bank's decision to keep the cash rate on hold at 3.5 per cent.
The RBA last cut the cash rate by a quarter of a percentage point in June, following a half a percentage point cut in May.
Commonwealth Bank chief economist Michael Blythe said the RBA appeared to be more positive about the economic outlook and further interest rate cuts appeared unlikely.
"There's certainly nothing there which suggests they are ready to pull the trigger again, we're in that kind of wait-and-see phase," he said.
However, he said the RBA had room to cut again if the global economy took a turn for the worse.
"There is still that big offshore uncertainty, which suggests that if they are going to change rates soon it's still more likely to be down than up."
JP Morgan Australia chief economist Stephen Walters said it would be hard to see the RBA cutting the cash rate in the short term, with local inflation on target and economic growth close to trend.
"We've learned over the past couple of years that things change pretty quickly, but it would take some pretty fundamental shifts in markets or domestically to get them to move," Mr Walters said.
"That may happen, in fact we are still forecasting them cutting rates towards the end of the year but they are clearly in no rush."
Mr Walters said it would take a combination of events to cause the RBA to cut the cash rate in the next few months, not just a lack on action by the European Central Bank (ECB) on the euro zone financial crisis
"It's more to do with if the ECB does not do enough and we have more sovereign trouble," he said.
"I don't think that is enough, I think you would need to see more Australian dollar strength and some weakness in the domestic data for the RBA to do anything and we're forecasting all of that.
"I think you would need a combination of all three."
