Market expectations for the RBA’s first cash rate decision of 2018 overwhelmingly pointed to no change, with AMP Capital chief economist Shane Oliver stating it was “too early for the RBA to consider raising interest rates”.
“While confidence, jobs and non-mining investment are strong, inflation remains below target, wages growth remains around a record low, uncertainty is high regarding the outlook for consumer spending and the Australian dollar is too strong,” he said.
Domain economist Andrew Wilson added that the Reserve Bank would take a “wait and watch” approach as it was dealing with a “mixed bag”.
Slow wages growth, low inflation and a high Australian dollar were cited by economists as reasons why the cash rate would continue to remain on hold.
A rate rise would have the effect of driving up the Australian dollar even higher, negatively impacting growth, said BIS Oxford Economics associate director, economics Richard Robinson.
“Economic growth is reasonable, so a rate cut is not warranted. A rate cut would also re-ignite the property market,” he said.
But a statement from the Australian National University Centre for Applied Macroeconomic Analysis RBA Shadow Board said “favourable economic data” suggested that interest rates “will not remain low for much longer”.
“Looking to mid- and end-year, there is a slight shift in the board’s assessment in favour of higher interest rates,” the statement said.
