Most Expect Stable Cash Rate ahead of GDP

Economists and academics are split as to whether the Reserve Bank should be raising the cash rate as the central bank board holds its monthly meeting.

The Organisation for Economic Cooperation and Development last week predicted a move by the end of this year on the basis of inflation and wages picking up, but financial markets are generally of the view the cash rate will remain at a record low 1.5 per cent until 2019.

However, the Australian National University’s so-called “shadow RBA board” made up of economists, academics and former central bank board members, are putting a 49 per cent chance of an imminent move, while placing a 51 per cent risk of the cash rate remaining steady.

They see a 73 per cent probability of an increase in the next six months.

These results were similar to last month.

Such expectations come ahead of what could be a strong economic growth result when the March quarter national accounts are released on Wednesday and a sharp rebound from a disappointing final few months of 2017.

New figures released on Tuesday showed exports will contribute 0.3 percentage points to growth in the quarter, after a hefty revised contraction of 0.65 basis points in the December quarter.

Government investment is also expected to add around 0.4 percentage points to growth.

Economists were largely sticking to their earlier forecast of a 0.8 per cent growth expansion in the economy in the March quarter, double the rate of the previous three months.

This would lift the annual rate to 2.7 per cent from 2.4 per cent.

However, following Tuesday’s data, Westpac economists have upgraded their forecast to a quarterly rise of 1.1 per cent to an annual rate of three per cent.

courtesy : sbs.com.au
photo : FXStreet

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