The Reserve Bank is tipped to pass up the last opportunity to cut the cash rate in 2015, when the board meets this afternoon, leaving rates steady at 2 per cent for the seventh month in a row.
This is despite many economists believing another rate cut is necessary in the near future to give the Australian economy another kick along.
But in an uncharacteristically unguarded question and answer session on November 24, the Reserve Bank Governor said he was in favour of keeping the cash rate steady this month, suggesting policy makers should ‘chill out’ over Christmas and take stock of the economy.
Mr Stevens also questioned what impact a rate cut might have on a flagging economy, saying “I’m more than content to lower it if that actually helps, but is that the best thing to do at any particular time?” he said.
Despite this, RateCity’s monthly analysis of key economic indicators shows a rate cut is still on the cards 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.
“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 despite the RBA Governor ruling it out.
“Aussie exports are hurting as severe weather takes its toll on our local producers while iron ore hit a six-year low last week,” Tindall said.
“Ordinarily, that would give the RBA impetus to cut the cash rate but for now, we’ll all just wait and see what the post-Christmas economy looks like,” she said.