The RBA has followed market consensus, leaving the official cash rate unchanged at 0.25 of a percentage point, which the central bank has earlier outlined to be the lower bound.
Before the rate announcement, comparison site Finder surveyed 23 leading economists, with everyone suggesting the Reserve Bank will hold interest rates.
One of the economists who predicted a hold was AMP Capital’s chief economist, Dr Shane Oliver, who suggested back-to-back cuts was as far as the RBA should go.
Dr Oliver said history has shown the folly of going to negative interest rates in other countries.
“0.25 [of a percentage point] has long been identified by the RBA as the lower bound,” Dr Oliver said.
“There is little benefit to be gained by going to zero or negative based on the experience of Europe and Japan.”
Cash rate to stay put, but QE on cards
Most economists highlighted that the RBA will treat 0.25 of a percentage point as if it is 0 per cent and have no appetite to cut further.
“This leaves only one effective tool in the RBA’s armoury: quantitative easing,” said Finder insights manager Graham Cooke.
Quantitative easing (QE) is a process where the central bank creates new cash to decrease, or ease, the cost of borrowing.