TWEET TALK: Hold but for how long?

Economists expect the central bank to keep rates on hold today, but there's less consensus on whether there are more cuts to come.

Experts in the Twittersphere are expecting the Reserve Bank of Australia to hold the official cash rate at its October board meeting today but are divided on the likely tone of its statement and potential for further cuts.

The views reflect an AAP survey of 13 economists expecting no change to the record low 2.5 per cent cash rate at today’s meeting at 1430 AEST. However only five of the surveyed analysts predict no further cuts this year, while all expect the Reserve Bank board to either keep rates on hold or begin to hike them in 2014.

Via Twitter, some economists said the central bank was likely to adopt a more neutral tone ahead of a rate hiking cycle, while others believed its easing bias would continue for the time being.

Market Economics managing director and Business Spectator columnist Stephen Koukoulas (@TheKouk) said improving economic indicators were key (Why 2014 will be the year of the rate hike, October 1).

“No cut: RBA to flag more upside than downside risks so even the easing bias likely to be gone,” he tweeted.

Treasury dealer at the Arab Bank of Australia David Scutt (@David_Scutt) also expected the board’s tone to be “neutral as neutral can be” and that it would hint at its currency objectives and housing market concerns.

“They'll suggest they'd like a lower AUD with NO easing bias,” he tweeted.

“They'll say what they said in August re existing [housing] stock but acknowledge home construction is accelerating, albeit off low levels.”

On the other hand, chief market analyst at Invast Australia Peter Esho (@PeterEsho) said the Reserve Bank board would flag the possibility of further cuts – which would in turn impact the local sharemarket this afternoon.

“No change, will say door still open for more cuts but will start adding lending risk etc. Market will be guided by former,” he tweeted.

In contrast, Eureka Report investment strategist Adam Carr (@AdamCarrEcon) said the Reserve Bank board wouldn’t shift its easing bias just yet due to continued uncertainty in our transition away from non-resource-led economic growth.

“I think they'll hold steady today and i'm not expecting too much in the way of changes to the statement,” he tweeted.

“Having said that, the risk is the statement is more dovish as I don't think the RBA are concerned about a housing bubble.

But they are concerned about the end of the mining boom and a downturn here.”

OptionsXpress market analyst Ben Le Brun (@benlebrun) also believed there was “no chance” of a rate cut today but noted further cuts in the next few months were likely, followed by a rate hiking cycle early next year.

“Interesting there's a 42% chance of a cut in Nov & a 100% chance of 2x cuts by mid 14. Then a 100% chance of a rise by Feb 15,” he tweeted.

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