Economists give their view on the Reserve Bank's decision to leave official rates on hold for a fifth month in a row.
Rory Robertson, interest rate strategist, Macquarie
"It sounds like the RBA doesn't want to bang the drum about rate hikes. This is a much less hawkish statement than the markets had anticipated.
Yes, the economy is in much better shape than anyone thought a few months ago. But it's not like it needs to be restrained, either. The RBA would probably like to move from an emergency setting but the right moment hasn't presented itself.
"The market pricing of tightening for the next 12 months is far too aggressive, given growth is still projected to be sluggish for much of next year."
Annette Beacher, senior strategist, TD Securities
"According to this statement, they are firmly in neutral stance. So we are back to data watching to guess the RBA's path in future.
"Let's just say that the chance of a rate hike in October is much diminished today compared to yesterday. We have our timing of the first rate hike in June and there is potential to bring that forward. But today's statement doesn't make me want to bring forward the time of a rate-hike to year-end."
Su-lin Ong, senior economist, RBC capital markets
"The RBA is reasonably upbeat, both about the global and the Australian economies and in particular about China. It important to note that their expectations of weakness in capital expenditure here is unlikely to hold.
"So all in all, these are not consistent with a cash rate of 3 per cent, which clearly is an emergency setting. We are bringing forward the timing of the first rate hikes to Q4 this year from Q1 next year."
Michael Blythe, chief economist, CBA:
"I can't see any particular hardening in the rhetoric relative to what they have been saying over the past month.
Markets were looking for some indication of that hardening to justify October rate rise calls, and we don't appear to have got that.''
"We're still left with the next move being up, but we'll still be debating about the timing for a while yet.
"We think it will be first quarter 2010. We think they'll hold off at least until next year, but if the economy continues to improve the way it appears to be then the risk is that you have to pull that call forward, but not right at the moment."
Riki Polygenis, economist, ANZ bank:
"I think the Reserve Bank has tried not to give too much extra guidance to the market; there's been no explicit change in their bias.
"The tone of the statement is a little bit more upbeat on the economy, but that's not unexpected given the more positive data we've had, but at the same time they've refrained from saying rates will need to return to normal, or any of the other more hawkish commentary from the past few weeks.
"You can interpret that as the RBA hedging its bets, clearly rates need to increase from here, but at this point in time the timing is still uncertain."
Reuters
