Reserve Bank flags period of interest rate stability at 2.5 per cent

The Reserve Bank has left interest rates on hold, and says that is where they are likely to stay for some time.

The official cash rate target has now been steady at 2.5 per cent for the past six months, after the RBA last cut its benchmark rate by 25 basis points in August.

Today’s decision marks the longest period of interest rate stability since the RBA left rates on hold at 4.75 per cent for almost a year between raising them to that level in November 2010 and cutting them back to 4.5 per cent in November 2011.

The bank’s decision surprised no one, with all 32 financial institution economists surveyed by Bloomberg ahead of the meeting forecasting rates to remain steady at 2.5 per cent.

Economists that are forecasting a further rate cut expect the move later in the year, as unemployment rises.

However, the statement by Reserve Bank governor Glenn Stevens has cast further doubts on the likelihood of another rate cut, and certainly implies that the next move is likely to be many more months away, whether it is up or down.


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