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Post-Easter RBA decision may disappoint

By Staff Reporter
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Investors hoping for a post-Easter interest rate drop may be sorely disappointed, according to an economist.

AMP Capital's chief economist and head of investment strategy, Shane Oliver, recently noted that he expects the Reserve Bank will not be cutting interest rates next week.

In his Weekly Market & Economic Update report, Mr Oliver said that in Australia all eyes are on the Reserve Bank “which is expected to leave interest rates on hold.”

Last month rates were kept on hold by the Reserve Bank, sitting firmly at 3.0 per cent. Loan Market's Paul Smith at that point noted that "There are some patches of the economy that will continue to pressure the RBA to lower interest rates in the coming months, especially if the Aussie dollar continues to trade at its present value and if trade data softens."

Improving housing indicators and consumer confidence are pointing to traction from the previous cuts working their way through. This may prompt the RBA to take this same “wait and see” approach for April.

Data yet to come through should see a trade deficit for February, a gain in new home sales, a gain in building approvals and a modest rise in retail sales, Mr Oliver predicted.

He also said that he expects benign inflation and “ongoing risks to the growth outlook” point to an easing bias that he has previously told Smart Property Investment should materialise into a 50 basis point total cut over the rest of the year.

Overall, he wrote, he does not expect the Board to cut on Tuesday (2nd April) when they meet again.

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