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Rates on hold till mid-year: HSBC

By webmaster
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Economists widely believe the Reserve Bank will keep rates on hold again when the Board meets later this week.

According to HSBC economist Paul Bloxham, the RBA is largely comfortable with the current monetary policy setting.

At the February Board meeting, governor Glenn Stevens said it is unlikely the RBA will have to lift rates any time soon as the risks to inflation are almost all to the upside.

“As such, HSBC believes rates will remain on hold this month and next. We still expect the next move around mid-year – with May or June pencilled in as most likely – though we are watching the labour market carefully to pin down the timing,” Mr Bloxham said.

“We expect the unemployment rate to drift into the 4’s in coming months, and view this as a necessary condition for a mid-year rate move. We still expect a total of 50bp of tightening this year and another 50bp in the first half of next year. Cash rate set to peak at 5.75 per cent in mid-2012.”

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