Reserve Bank holds cash rate for July

The Reserve Bank of Australia has kept the official cash rate at 1.75 per cent following its July board meeting as it waits for second quarter inflation figures.

With inflation data for the second quarter not available until late July, the RBA is not expected to change the cash rate until next month at the earliest.

The ASX 30-Day Interbank Cash Rate Futures July 2016 contract anticipated the steady cash rate, pricing in a 90 per cent chance it would be held on 4 July.

AMP chief economist Shane Oliver said the RBA is “likely in wait-and-see mode” following the volatility caused by the UK’s decision to leave the European Union, adding that last month the central bank had “expressed comfort with current monetary settings”.

The Australian National University’s Centre for Applied Macroeconomic Analysis’ (CAMA) RBA shadow board assigned a 6 per cent chance to a rate hold

Melbourne Business School associate professor Mark Crosby, a member of the CAMA RBA shadow board, suggested that while the Brexit vote had undoubtedly led to volatility, there is “very little reason” for it to affect the Australian cash rate.

“The Brexit vote has obviously caused volatility in financial markets in recent days, but this Leave result has changed nothing in terms of Australia’s fundamentals,” he said.

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