RBA surprises market with rate decision

The board surprised most observers by reducing the cash rate to a record low of 1.75 per cent, after it had been left at its previous record low mark of 2 per cent since May 2015.

Just one of the 31 economists and commentators surveyed by comparison website finder.com.au forecast that rates would drop today.

Griffith University’s head of finance and financial planning, Mark Brimble, predicted the RBA would be swayed by weakening economic indicators and a desire to stimulate growth.

“The majority of indicators are weakening (employment, confidence, sentiment, output, market volatility, capital expenditure, the ill-advised Fed movement last year, default rates, oil-related debt concerns, etc) and the rise in rates by banks (which they argued was due to APRA capital requirements) has further dampened growth. The Reserve Bank has room to move on rates and the economy needs the support – both the actual and the psychological,” Mr Brimble explained. 

Twenty-three per cent of finder.com.au’s commentators believe a rate rise is due in 2016, while six of the 31 commentators predicted a rate cut at some point during the year.