Christmas rate reprieve off the table but cut likely in 2016

30th of November 2015 | by Laine Gordon

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The Reserve Bank is tipped to pass up the last opportunity to cut the cash rate in 2015, when the board meets tomorrow, leaving rates steady at 2 per cent.

Despite this, a RateCity.com.au monthly analysis of key economic indicators shows a rate cut is still on the cards and likely to be in the first quarter of 2016

The RateCity.com.au RateUlator analyses 23 economic indicators – both domestic and international – to predict the outcome of each RBA cash rate decision.

Sally Tindall, money editor at RateCity.com.au, said 10 out of 23 indicators suggested a rate cut, compared with just eight in November. Yet, the RBA is expected to take a ‘wait and see’ approach.

“A number of key economic indicators are pointing to a rate cut, yet Glenn Stevens has made it clear that the cash rate will remain steady for now,” she said.

“The RBA will be keeping a close eye on its US counterparts next fortnight to see whether the highly-anticipated increase to their cash rate will eventuate and what impact it will have on the Australian economy.

“Beyond the US, events in Europe and Syria have shaken the global community, but the RBA is likely to adopt a ‘wait and see’ approach in relation to this as well,” she said.

Closer to home, several key indicators pointed to a cut but the RBA Governor has all but ruled it out for December.

“Aussie exports are hurting as severe weather takes its toll on our local farmers and producers, and business confidence levels have slumped to the lowest point since the 1950’s,” she said.

“Ordinarily, that would give the RBA impetus to cut the cash rate.

“Yet Glenn Stevens’ instructions to ‘chill out’ and wait to see what the data shows over Christmas means borrowers will have to sit tight until February at earliest for a rate reprieve.”

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