No rate rises expected until August

The Reserve Bank will almost certainly leave interest rates on hold at its meeting next week while it waits until the economic situation becomes clearer.

Economic output shrank 1.2 per cent in the three months to March – the worst quarterly slide since Australia's last recession in 1991.

But most economists expect the bank to start lifting the official interest rate again in July or August. Reserve Bank governor Glenn Stevens warned last month that rates would need to rise "at some point" to rein in inflation.

Markets have priced the chances of a June rate rise next Tuesday at just 8 per cent. A July rate rise is priced at 28 per cent while markets believe there is a 50/50 chance of a 0.25 per cent rise in August, taking the official cash rate to five per cent.

Source: Herald Sun