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Rates to stay on hold

By webmaster
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The RBA is not expected to lift the official cash rate again until May 2011, according to National Australia Bank.

National Australia Bank’s chief economist Alan Oster said recent economic data showed that the economy was not bouncing back as quickly as first thought, as such, he expects the board to hold fire on rates until mid-2011.

“Clearly each RBA meeting will remain data dependent. That said, clear evidence of the income and investment effects of the mining boom and its inflationary potential are unlikely to be evident until mid 2011,” Mr Oster said.

“With that momentum building into H2 2011 and inflation accelerating we have maintained our end point target cash rate at 5.25 per cent. But it is now unlikely to be reached before August 2011.”

Australian economic growth continues to moderate, although not as rapidly as the latest national accounts data might suggest. Annualised trend data show that GDP growth declined from around 3.2 per cent in the March quarter to 2.5 per cent in the September quarter.

Mr Oster said he still expects to see growth of 4.25 per cent through the course of 2011, but the lower base means it has shaved down its year-average forecast to 3.6 per cent.

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