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Despite the Australian economy bracing for post-Brexit impacts, it won’t have an effect on the Reserve Bank’s cash rate decision today, according to the vast majority of experts.
According to a survey by comparison website, finder.com.au, 30 out of 31 commentators and economists believe the official cash rate will remain on hold at 1.75 per cent at today’s monthly board meeting.
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The majority of those surveyed cited the federal election and the Brexit outcome as contributing factors to the RBA’s likely “wait and see” approach.
“The RBA expressed comfort with current monetary settings after the June meeting and it’s likely in wait and see mode regarding the risks posed by Brexit,” AMP Capital chief economist Shane Oliver said.
Market Economics managing director Stephen Koukoulas was the lone voice of dissent, saying he believes the RBA will further cut the cash rate today.
“Downside risks to the global economy has intensified to the point where a cautionary rate cut would be prudent,” Mr Koukoulas said.
Looking ahead, 67 per cent of those surveyed believe a further rate drop will happen again in August, while 17 per cent forecast it will occur in November.
Fifty-nine per cent predict the cash rate will fall no lower than 1.50 per cent this cycle, while 24 per cent forecast the cash rate will fall to 1.25 per cent before an upturn.
Bessie Hassan, spokesperson at finder.com.au, said while the majority of experts predict the cash rate to stand still for another month, the result of the British EU referendum will lead to uncertainty in the Australian economy.
“Over half of experts and economists in finder.com.au’s RBA survey expect it to have a negative effect on the Australian economy,” Ms Hassan said.
“That said, it may be too early to tell just how we will be affected. The process will take time, with negotiations likely to take more than two years.
“Volatility in global markets could mean that Australian banks pay more for the capital they borrow from overseas wholesale markets. As a result, we may see banks lifting home loan rates independently of the Reserve Bank.”
[Related: Analysis: What brokers can learn from the UK]
