news

Cash rate should remain steady until late 2014: AMP

1

Higher than expected inflation and a fall in the Australian dollar in 2013 has substantially reduced the possibility of another cash rate cut, according to a leading economist.

Shane Oliver, head of investment strategy and chief economist at AMP Capital, said Australia’s inflation rate rise of 0.8 per cent in the December quarter was roughly double economists’ expectations. This, combined with a 15 per cent fall in the Australian dollar over the last year appears to be playing a role in driving prices higher, he said.

“This is clearly a disappointing outcome and substantially reduces the possibility of another rate cut from the RBA,” Mr Oliver said. “However, while the increase in inflation will concern the RBA, it’s not bad enough to bring on an imminent rate hike either, as the annual inflation rate of 2.7 per cent at the headline level or 2.6 per cent for underlying inflation is still in line with the RBA’s inflation target, and normal volatility may have exaggerated the latest rise in inflation. In fact, excluding volatile items like fruit and vegetables, inflation was just 0.6 per cent in the quarter.”

According to Mr Oliver, sub-par economic growth and "the arguably still too strong" Australian dollar mean it’s too early for the RBA to consider raising interest rates.

Mr Oliver said he remains of the view that the RBA will continue to leave interest rates on hold at 2.5 per cent for ‘an extended period’ before a modest rate hike around September or October.

Thank you.

Your enquiry has been sent to a local Aussie Mortgage Broker.

We will be in contact with you shortly.
Opps.

error occurred.
Do you need help finding the right loan for your investment?
What Aussie do for you:
  • Give expert mortgage advice to help you find great investment loan deals
  • Help you maximise return by lowering financing costs
  • Save you time and effort by helping with the paperwork
First name
Last name
Location
Mobile Number
Are you an Australian Resident?
promoted stories

Top Suburbs

Highest annual price growth - click a suburb below to view full profile data:
1.
PAMBULA 42%
2.
MILSONS POINT 41.26%
3.
SPEERS POINT 39.69%
4.
SPRINGWOOD 37.72%
5.
ILUKA 36.3%