Economists believe that banks will commence a series of independent interest rate moves right after the elections.
There is no expectation of any action from the Reserve Bank until November 2010 or even later. Banks are unlikely to continue absorbing the extra costs of funding for that long.
Minutes from the RBA monthly meeting show the reserve bank is playing a ‘wait and see’ game, wary of global economic uncertainty and satisfied earlier rate rises had taken excess heat out of the economy.
AMP Capital Investors chief economist Shane Oliver said the outlook for the official cash rate meant banks would be more likely to increase interest rates independently of the RBA.
The minutes were published on Tuesday as a new survey indicated wage growth was slowing and the downward pattern is expected to continue.
The RBA minutes further confirm that the board was “comfortable” leaving the cash rate unchanged at 4.5 per cent following a drop in annual underlying inflation to 2.75 per cent.
While markets had settled “somewhat”, the board also felt there was “still more uncertainty over the global outlook”.
Economists from AMP Capital Investors and TD Securities said a rise in the base rate was now unlikely until at least November.
Citi economist Paul Brennan forecast that the RBA would lift the cash rate by about 100 basis points over the course of 2011, but said an increase was unlikely this year.