RBA predicted to leave rates on hold

A broad consensus has developed around the Reserve Bank (RBA) leaving interest rates on hold at its meeting tomorrow.

HSBC Global Research chief economist, Australia, NZ and Global Commodities, Paul Bloxham set the tone saying he expected the RBA to remain on hold this month.

“We expect the RBA to remain on hold in March and the board discussion to be about whether another hike is needed, rather than about any prospect of rate cuts,” he said.

“Forthcoming personal income tax cuts from 1 July and the risk of more fiscal spending in the May budget, perhaps primed by an election that is due before mid-2025, bolster the case for the RBA to remain on hold,” Bloxham said.

At the same time, Equity Trustees Asset Management investment specialist, Grant Mundell, said the economic environment remains resilient and should be supported by interest rate cuts into 2025.

“The probability of a recession has lessened. Interest rates are unlikely to rise from current levels and most economists forecast rates will fall either in the second half of 2024 or early 2025 as inflation normalises,” he said. “A ‘soft landing’ scenario is supportive for credit.”

“We think interest rates will fall as inflation trends toward central bank target levels. In recent time, central banks have been worried about inflation leading to successive rate hikes,” Mundell said.

He pointed to monetary tightening and the significant restriction on lending conditions.

“Broad money has decreased in turn,” Mundell said.” This fall in broad money has been significant. This fall is consistent with a reduction in inflation and provides the opportunity for the RBA to ease.”