RBA unlikely to cut in February
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SYDNEY, Feb 1 AAP
February 03 2013, 09:59AM
Australians expecting another interest rate cut may have to wait just a little bit longer.
The Reserve Bank of Australia (RBA) is widely expected to keep its finger off the interest rates trigger when it meets for its first board meeting of the calendar year on Tuesday.
An AAP survey of 15 economists shows that all but one expect the RBA to keep the cash rate steady.
The RBA last cut its cash rate in December, when it was eased by a quarter of a percentage point to three per cent - back to levels last seen during the global financial crisis four years ago.
CommSec economist Savanth Sebastian said an improved global outlook should influence the RBA's expected decision to hold off a rate cut on Tuesday.
"The numbers out of China have been very positive and even US numbers have been very supportive of the Reserve Bank leaving rates on hold," he said.
"It seems likely that they'll keep rates on hold for the first six months of this year."
HSBC's purchasing managers' index has shown Chinese manufacturing sector improving - with the index rising to 52.3 in January from 51.5 in December.
Mr Sebastian said a rise in commodity prices - especially for iron ore - were also likely to keep the RBA's rates decision on hold.
"Many of the commodity prices, especially iron ore, have come back, and that's definitely going to support income into Australia," he said.
HSBC Australia chief economist Paul Bloxham said the RBA would be satisfied with the cash rate's current level, after 1.75 percentage points of interest rate cuts since November 2011.
"Even though inflation is low enough to allow them (the RBA) to cut, if they wanted to, we think they won't," he said.
"They already delivered two interest rate cuts in the past four months."
The RBA eased interest rates four times in 2012, and Mr Bloxham said it appeared this now could be paying off.
"We think there are some signs the local economy is showing some early signs that monetary policy is lifting the interest rate sensitive sectors," he said.
Bank of America chief economist Saul Eslake said the RBA might not cut in February but could do so later, if local or international conditions deteriorated.
"There hasn't been enough information since the last rate cut to prompt the Reserve Bank to cut further.
"It's only four weeks until the next meeting, so they can afford to wait," he said.
"But I think they'll show an easing bias in the first half of the year."
By Caroline Smith