RBA tipped to leave rates on hold today

Economists almost unanimously expect the RBA will leave interest rates on hold later this afternoon, as fears about inflation fade.

Official inflation data released last week was well below market expectations, and showed inflation was tracking well inside the RBA’s target 2-3% band.

Westpac chief economist Bill Evans says the RBA can now pause for an extended period.

“The RBA is set to use the information from this release to keep rates on hold at the meeting [today] and most likely for the remainder of 2010.”

While Evans expects rates could be on the rise in early 2011, a series of weaker-than-expected economic indicators have supported this view.

Yesterday, data showed new home sales fell by 5.1% in June, while a fall in house prices and weak retail figures have also added weight to the view that the RBA can afford to take a wait-and-see approach with what looks to be cooling conditions.

CommSec economist Craig James says one key point of interest coming out of today’s meeting will be what RBA Governor Glenn Stevens has to say about monetarty policy settings.

While Stevens’ recent statements have indicated a “tightening bias” (meaning the RBA was leaning towards rate rises) today’s statement could suggest a more neutral stance (meaning rates could be on hold for a longer-than-expected period).

SmartCompany will report on the RBA’s decision just after 2.30pm.