Safe betting on interest rates

The safest bet this week was always going to be that the Reserve Bank would make no change to the official cash rate, leaving it at the historic low of 2.5 per cent.

Interest rates strategist at JP Morgan, Sally Auld, was ‘bang on the money’ when she told ABC Radio on Tuesday morning that interest rates are likely to remain unchanged for some time yet, adding that the RBA's current approach to monetary policy is more reactive than proactive.

"It needs to sit there and accumulate evidence that the economy needs some more stimulus and we think that process will probably take another three to four months," Ms Auld said.

Indeed, in his statement announcing this week’s decision, Reserve Bank Governor Glenn Stevens said that ‘recent data on prices show inflation consistent with the medium-term target and this is likely to remain the case over the next one to two years’.

He added that the full effects of recent lowering of interest rates are still coming through, and ‘will be for a while yet’.

Ms Auld told the ABC she expects the next official rate cut to take place next March.