Economists and analysts are of the opinion that the Reserve Bank of Australia (RBA) would keep the 4.25 per cent overnight cash rate when its board meets Tuesday, April 3.
This, despite the low inflation rate which creates favourable conditions for an interest rate cut. Inflation has gone down to a two-year low of 1.8 per cent.
While economists agree there is only a small chance that the current cash rate would be altered they did not discount the possibility that the RBA would make a rate adjustment in May at the next RBA board meeting.
Annette Beacher, research head at TD Securities Asia-Pacific, forecast the interest rates would even go up by 50 basis points in the coming months. She said despite the re-ignition of a near-term rate but, there are no immediate triggers for the Australian central bank to recommend a rate cut.
She said lower inflation rate, looming global risks and contractionary fiscal policy are slow burn issues, not smoking guns.
The RBA is actually under pressure to cut the overnight cash rate after the Australian Bureau of Statistics released data that showed the number of local council approvals for new house builds dipped in February to its lowest level since May 2009.
Housing Industry Association chief economist Harley Dale and Master Builders Australia chief economist Peter Jones pushed for rate cuts because the rate reductions in 2011 failed to lift residential building.
Mr Jones said cutting the overnight cash rate could boost confidence and reignited activity in the building industry.
"There's a disconnect between what's happening in the non-mining economy - which is most of us - and out-of-cycle rate rises (but the banks and other lenders).... The best thing that RBA could do to stimulate confidence among buyers and upgraders would be to cut interest rates," Australian Finance Group General Manager of Sales and Operations Mark Hewitt was quoted by Business Spectator.
Former RBA members Warwick McKibbin estimated the odds of a rate cut at only 30 per cent. HSBC chief economist Paul Bloxham opined that there is not enough basis for the RBA to cut rates, but he expects the Australian central bank to have an easing bias.
