Could interest rates rise? The RBA decides

Monday, 3 February 2014  Features
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Economists from the Australian School of Business at UNSW Australia are available to give their commentary and analysis of the Reserve Bank's next interest rate move.

Consensus suggests the Reserve Bank will hold tight on another cut at its first board meeting of 2014, after a stronger than expected inflation number for the December quarter.

The Australian School of Business’ Professor James ​Morley ​is a member of the RBA Shadow board, which meets each Thursday before the decision by the Reserve Bank of Australia board. He said "inflation for 2013 was 2.7%, which is slightly above the mid-point of the 2-3% target range. However, this is likely due to one-time effects of the depreciation in the Australian dollar from its record highs against the US dollar. As a result, inflation can be expected to run at the lower end of the target range in 2014 unless the dollar depreciates a lot further.”

“There is a chance that the RBA should start raising rates in the near term – although I expect the RBA to keep rates on hold at 2.5 per cent at this meeting and for the next few meetings too. However, the policy rate should definitely be returned to its neutral level of around 4 per cent over the medium term of the next 1 to 2 years.”

Tim Harcourt, the JW Neville Fellow in Economics at UNSW’s Australian School of Business, said the threat of a prolonged recession in the US and Europe appears to be lifting, with stimulus measures there being removed – at the same time as Australia’s global prospects look rockier.

He said “this may allow room for a cut. However I would expect Reserve Bank governor Glenn Stevens to kick off the new year with the removal of any residual easing bias in the post-meeting statement, with a significant re-casting of monetary policy.”

Other academics are also available to discuss how a change of interest rates would impact on inflation, unemployment, and the wider economy. Dr Ni​gel Stapledon ​from UNSW’s Australian School of Business, is available on houses prices and how changes in rates are influential on house prices, and the wider economy. He says “Australia's current boom is slowly receding, however that will not change the long-term story. Resources are still strong, but labour and capital will shift in focus."

For further comment call
James M​orley ​​​​​​on 02 9385 3366, or james.morley@unsw.edu.au
Tim Harcourt ​​on 0408 485 479, or tim.harcourt@unsw.edu.au
Dr Nigel Stapledon on 02 9385 9703, or nigel.stapledon@unsw.edu.au 

Media contact​

Julian Lorkin: 02 9385 1574

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