RBA makes May cash rate call
In this special announcement, partnered by Legal Home Loans, learn the outcome of the Reserve Bank of Australia’s monthly board meeting.
![RBA makes May cash rate call](/images/articleImages-850x492/RBA-lw.jpg)
In line with expectations, the RBA has held the cash rate at a record low 0.1 of a percentage point.
The decision to leave interest rates on hold came as no surprise to economists, with the RBA openly repeating on several occasions that rates will likely remain as they are until 2024 at the earliest.
CreditorWatch chief economist Harley Dale said that any chatter about an early rise has been silenced, not only by continuing RBA rhetoric but by the benign print for the March 2021 quarter consumer price index (CPI) issued last week.
“The RBA mantra is intact – we won’t be seeing a rise in interest rates for a very long time,” Mr Dale said.
“That said, history tells us the first increase in interest rates always occurs at a different point in time than early forecasts, but the need for conjecture is still a couple of years off.”
Similarly, head of investment strategy at AMP Capital, Shane Oliver, believes a rate hike is still a fair way off.
“While the economy is recovering faster than expected, the RBA is still a long way away from seeing its stated requirements for a rate hike – being a tight jobs market, wages growth well above 3 per cent and actual inflation sustainably within the 2-3 per cent target range,” Dr Oliver said.
But despite confidently predicting a long hold, Dr Oliver, like a number of other economists, does believe the RBA will opt to lift rates before its expectation for “2024 at the earliest”.
Head of economic and markets research at Bendigo Bank, David Robertson, predicted 2022 could be the year the bank finally makes a move.
“The RBA will most likely start to tighten policy by an increase in interest rates in early 2023 or late 2022, the timing dependent on the pace and success of vaccination programmes,” Mr Robertson said.
With attention moving away from rates, Mr Dale tipped all eyes will be on the RBA’s bond-buying program – the primary ammunition left in the armoury.
“A further injection of liquidity is highly likely, in CreditorWatch’s view.
“The RBA appears content, issuing strong ongoing updates on the economy, relative to expectations held in 2020. The Bank noted the further decline in the unemployment rate in March 2021 but remains cognisant of the conspicuous lack of healthy inflationary pressure in prices and wages.”