Cash Rate – No Change

The Reserve Bank of Australia (RBA) has announced it will maintain the official cash rate at 2.50%.

Most Economists are now forecasting this period of interest rate stability to continue until mid-2015, notwithstanding an improvement in business confidence, as measured by a recent Dun & Bradstreet survey of 800 businesses in Australia. 40% of the surveyed businesses are expecting their profit in the final quarter of 2014 to be higher than in the same period a year ago. Just 11% are expecting their profits to fall. Business in the retail, services, finance and real estate sectors are the most optimistic about the next three months whilst those in the manufacturing, construction, transport and utilities sectors still expect their profits to reduce.

Interestingly, the survey showed an increase in the number of businesses expecting prices to moderate, meaning less pressure on the RBA to increase the cash rate and supporting the Economist’s expectations of no change to the cash rate for many months.

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