Rates to hold in June, key economic indicators suggest

1st of June 2015 | by Laine Gordon


The cash rate is set to hold at 2 percent when the Reserve Bank board meets tomorrow, a new RateCity analysis of key economic indicators has revealed.

RateCity analysed 17 core economic indicators in an effort to understand what will influence the RBA’s June rate decision and found that several – including a low Australian dollar, high levels of household debt and investor lending – would be cause to leave rates steady.

Peter Arnold, financial analyst at RateCity, said the Reserve Bank meets almost every month, with the exception of January and the impact of the decision is felt country-wide.

“The outcome of the RBA’s rate review affects almost every Australian – whether they have a mortgage or money in the bank. But understandably, many people don’t know what goes into that decision,” he said.

“We know that the property-investor market is continuing to heat up – something that the regulator wants to control – and household debt levels remain worryingly high. That, combined with higher business-confidence levels after the Federal Budget announcement, means there is less need for a rate reprieve for businesses and consumers alike.

“On top of this, the Aussie dollar has been heading down since the May rate cut, which gives the RBA some breathing room to leave rates on hold this month,” he said.

But while most indicators were pointing to a hold tomorrow, other indicators suggest rates may drop further – albeit less likely, according to Arnold.

“We’re still seeing high levels of unemployment in Australia and inflation remains low – both of which would benefit from a rate cut to further boost the economy,” he said.  

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