Australian central bank likely to keep its cash target rate unchanged at 1.5 pct

The Australian central bank, Reserve Bank of Australia, is unanimously expected to keep its cash target rate on hold at 1.5 percent tomorrow. A small pack of forecasters expects one or two rate cuts by the end of the year but most expect no change this year. Since the last meeting on 2nd May, the Australian dollar has weakened against other major currencies and this should ease the central bank’s prior concerns about the competitiveness.

Meanwhile, the Australian GDP growth is likely to assist the central bank’s case. Following a solid 1.1 percent quarter-on-quarter non-annualized but seasonally adjusted gain in the fourth quarter, next week’s first quarter economic growth report is likely to show an expansion of around 0.5 percent. This is still respectable for a comparatively mature economy.