Until quite recently, there was something of a consensus that in 2015 the RBA was likely to lift rates, despite their monthly mantra about a period of interest rate stability. Some economists have argued that falling consumer confidence, slowing wage growth, and international uncertainty were all factors which would lead to lower rates, whilst on the other hand, the falling price of fuel at the pumps, and continued investment property demand might lead to higher rates.
So, interesting then that today the Commonwealth Bank of Australia (CBA) released a note in which they have pushed out any rate rise expectations into the first quarter of 2016. In the interim period, they say, the cash rate will most likely stay at current levels – at 2.5% – the rate it has been for well over a year now. They suggest that a cut to the current low rate is unlikely, because the falling dollar and oil prices will stop the RBA dropping rates further. Previously, the CBA had been suggesting a rise in 2015 was likely.
The CBA said, a rate cut wouldn’t necessarily help produce the confidence and the stability the RBA is seeking:
“It appears that households and business now equate rate cuts with ‘bad’ economic news.”
The bank thinks a cash rate of 3.5 per cent by the end of 2016 is quite likely.
