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RBA expected to hold rates

RBA expected to hold rates

(2 July 2012 – Australia) The Reserve Bank of Australia (RBA) is not expected to cut interest rates again this week according to all 21 economists surveyed by AAP. Economists' expectations were centred on just one more cut this year, bringing the cash rate to 3.25 percent.

If the RBA did make a cut it would be the third in a row due to fears about weak growth in the local economy and turmoil on European markets.

AMP chief economist Shane Oliver told AAP that a spate of strong data since the previous board meeting on 5 June may have changed the central bank's outlook on the domestic economy.

'I tend to think that because they cut at two meetings in a row, and because the GDP (gross domestic product) and April employment figures surprised on the upside.

'Right now they'd probably be inclined to sit back and wait and see,' he said.

Commsec chief economist Craig James said that while June's rate cut was influenced by Europe, the RBA would be looking for information on domestic growth before moving again.

'If the inflation figures are low at the end of July, as we expect, that will give the Reserve Bank some added confidence about cutting rates again, realising that inflation is under control and there's good reason to try and accelerate growth here in Australia,' he said.
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