RBA considered 40-bp cash rate raise
The Reserve Bank has revealed that it weighed up three different options for the size of the first cash rate rise in alm...
The Reserve Bank of Australia (RBA) has announced its decision on the official cash rate for April following a rare out of cycle cash rate reduction in March.
The RBA has followed market consensus leaving the official cash rate unchanged at 0.25 per cent, which the central bank has earlier outlined to be the lower bound.
Before the rate announcement, comparison site Finder surveyed 23 leading economists with everyone suggesting the Reserve Bank will hold interest rates.
One of the economists who predicted a hold, was AMP Capital’s chief economist Dr Shane Oliver, who suggested back-to-back cuts was as far as the RBA should go.
Dr Oliver said history has shown the folly of going to negative interest rates in other countries.
"0.25 per cent has long been identified by the RBA as the lower bound,” said Dr Oliver.
“There is little benefit to be gained by going to zero or negative based on the experience of Europe and Japan.”
Cash rate to stay put, but QE on cards
All 23 economists and experts surveyed expect the Reserve Bank of Australia (RBA) to hold the cash rate at 0.25 per cent on Tuesday.
Most economists highlighted that the RBA will treat 0.25 per cent as if it is 0 per cent and have no appetite to cut further.
“This leaves only one effective tool in the RBA’s armoury: quantitative easing,” said Finder’s insights manager Graham Cooke.
Quantitative easing (QE) is a process where the central bank creates new cash to decrease, or ease, the cost of borrowing.