The Reserve Bank of Australia is now expected to keep rates on hold until mid-2012, when it will lift the cash rate by 25 basis points.
According to National Australia Bank’s chief economist Alan Oster, the RBA will keep the official cash rate at 4.75 per cent for the next six to nine months in a bid to balance the weakness overseas with Australia’s robust economy.
“The global economic outlook has been clouded by a series of disappointing US and Western Europe economic indicators, big falls in equity prices and political obstacles in the US and Euro-zone,” Mr Oster said.
Australia’s outlook, on the other hand, remains relatively unchanged, with GDP growth expected to sit at 1.9 per cent by year’s end.
“Australian growth forecasts little changed, but unemployment rate marginally higher – as restructuring hurts near term employment. Core inflation will exceed 3 per cent by mid-2013,” he said.
“As such, the RBA will keep rates on hold for a considerable period – with a final 25 basis point rise in current cash rate cycle expected in mid-2012.”