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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General


The official cash rate was again unchanged last week following the monthly RBA board meeting and has remained at 1.5% since August 2016. The decision to leave the cash rate unchanged was universally expected, as was the unchanged neutral policy guidance. The Governor’s accompanying statement only contained a couple of changes, the most significant around the economic growth forecast for 2018 being adjusted from “a bit above 3%” to ”faster than in 2017”.

Given last week’s December quarter GDP number was 0.4% for an annual GDP of 2.4%, the above statement can be interpreted as the RBA now feeling comfortable with growth being above 2.4%, which is a major qualification of the RBA’s previous growth outlook of “a bit above 3%”

Just over four weeks ago, traders were pricing in an RBA interest-rate hike - the first since 2010 - as a done deal for the fourth quarter of 2018. They’ve since backtracked to bet that the RBA will maintain a record-low 1.5% for at least the rest of the year.

Markets continue to expect the RBA to begin a gradual tightening cycle late this year, with the risk of the timing pushing into early 2019 given the lower growth forecast – with a 25 basis point hike not fully priced in till May 2019.

Cash Rate Pricing Chart

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Source: Rural Bank


Disclaimer: Whilst all care has been taken in compiling the information, the information should not be relied upon as substitute for professional advice where necessary. Rural Bank accepts no responsibility for the accuracy, completeness or timeliness of the information and disclaims all liability in relation to any loss or damage suffered by the use of or reliance upon any information contained herein or in any attachment or annexure hereto by any person. Rural Bank – A Division of Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL 237879