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7 years since the last rate increase

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It's been seven years since the last time the Reserve Bank of Australia raised interest rates. The last time they did the AFL grand final between Collingwood and St Kilda resulted in a draw, the Commonwealth games were in Dehli and Steve Jobs and Osama bin Laden were still alive. It was seven years ago today, and the RBA board has met 76 times since, cutting rates 12 times with not one increase.

The result of this month’s meeting, to be held on Melbourne Cup day, is pretty much seen as a foregone conclusion, with all respected economists expecting the central bank to leave the cash rate at a record low 1.5 per cent.  Before last week’s unimpressive inflation result, the market was pricing in a hike from the RBA in August next year. Looking forward however, opinions are divided. 

ANZ's chief economist is calling for hikes next year, Credit Suisse and independent economist Stephen Koukoulas say cuts make more sense, while UBS and Bill Evans from Westpac reckon the RBA should stay on the sidelines for the foreseeable future.

"The RBA do not want to cut rates,” managing director of Market Economics Stephen Koukoulas says. "They’ve made that very clear.”Koukoulas says that while a cut is a risk for financial stability, weak inflation figures and below-trend economic growth alone make talk of rate cuts "highly appropriate”. 


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