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The Reserve Bank of Australia (RBA)  is due to announce its decision on interest rates at 2.30pm (AEST) on Tuesday.
The economists surveyed by AAP said the cash rate will remain at a 49 year low of three per cent after the central bank’s board meeting on August 4.

“The RBA appears to have no intention of reducing the cash rate any further,” said Matt Robinson, an economist with Moody’s Economy.com. reserve_bank_400

“I think a housing market bubble is starting to form, and given the sentiment that governor Stevens expressed in his speech to the Australian Business Economists, that is something that the RBA is watching and that would be a reason for them to maybe hike interest rates earlier.”

There were doubts about whether the RBA would be deterred from raising rates if unemployment continued to rise.

The RBA has kept the cash rate at 3 per cent for three consecutive months.

Michael Turner, an economist with financial markets research group 4Cast, said the prospect of rising unemployment would mean the cental bank could keep rates steady until well into 2010.

“We’re still of the opinion the worse is yet to come and things look better now than they did a couple of months ago, which is why we’re now calling it on hold (in August) rather than going lower,” he said.

“But we still think there’s enough of a story in the lack of utilisation in the economy at the moment that price pressure might be moderate enough at 3 per cent.

“We’re currently chewing on a rate rise in 2010 at the moment. It’s possible, but not until late 2010.”

If you look at the split in the market or the way the debate was being conducted it was very much the idea that the RBA isn’t going to hike because they never have while the jobless rate has been rising.

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Wall StreetTHE share market has opened marginally stronger the morning after the federal budget was handed down, and following a mixed lead from Wall Street.
At 10.15am (AEST), the benchmark S&P/ASX200 was up 12.1 points, or 0.31 per cent, at 3889.3, while the broader All Ordinaries gained 8.7 points, or 0.23 per cent, to 3872.3.

The four major banks were mostly higher at the open.

ANZ gained 4cents to $16.01, NAB was up 14 cents at $22.00 and Westpac was up 10 cents at $20.48.

The Commonwealth Bank, which reported cash earnings for the March quarter of about $1.15 billion, generating a cash return on equity of over 15 per cent, was down 20 cents at $36.40.

Resources weren’t as lucky, opening lower in morning trade.

Mining giant BHP was down five cents at $34.26, while rival Rio Tinto lost 4.41 per cent to $65.46.

Wall Street wobbled to a mixed finish on Tuesday as investors paused to assess gains from a long rally and mulled the new efforts to raise capital by banks and other firms.

The markets also digested better-than-expected data on the US trade deficit and reassuring comments from Federal Reserve chairman, Ben Bernanke, about the health of the banking system.

The Dow Jones Industrial Average was up 50.34 points, or 0.60 per cent, to settle at 8,469.11.
The tech-dominated Nasdaq dropped 15.32 points, or 0.88 per cent, to 1715.92 while the broad-market Standard & Poor’s 500 index lost 0.89 point, or 0.1 per cent, to settle at 908.35.

On the Sydney Futures Exchange, the June share price index contract was trading 17 points higher at 3885 on volume of 4900 contracts.
www.news.com.au

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