The Reserve Bank is expected to keep rates steady this week after consecutive rate rises this year. The cash rate is thus likely to remain at 7.25 percent.
Stephen Walters, senior economist at JP Morgan states there are a number of reasons why they may choose not to increase the rate at this month’s meeting on Friday.
"The Reserve Bank has already raised interest rates three times in the past three months and of course the commercial banks have raised interest rates by more even than the Reserve Bank, so that means there is a lot of tightening in the pipeline already and I don't think we've seen the full impact of that yet,” he says. “Also we've still got some instability in global credit markets.”
However, the RBA has warned that first-quarter Consumer Price Index data, due on April 23, is likely to show an annual inflation reading of four percent, against the three percent it targets. Walters says if this is the case, the RBA is likely to lift rates in May.
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