RBA cash rate

[DrInvestor]

Hey guys,
I have a uni essay about the cash rate. Just wondering what you guys think will happen. (I know how badly you want to, but please don't write my essay for me)

On the 5th May 2015, the Reserve Bank of Australia (RBA) board will meet to discuss domestic and global economic conditions to come up with a monetary policy statement and decide on the appropriate level of cash rate. Your essay should contain an explicit recommendation whether to increase, decrease (by how many basis points) or sustain the level of cash rate.

(You get a bonus point so 11/10 if you get it correct)

 

[Ed Barton]

Is this part of an economics degree? What year subject?

Really you shouldn't be asking this question on an internet forum. If you're struggling about where to start ask your lecturer/tutor. I'd start with reading the boards minutes from the last few meetings.

 

[Peter_Tersteeg]

I'd avoid trying to make a simple prediction in a uni essay about what the cash rate will do. The professionals can't get it right more than about 6 months out, prediction is a suckers game.

Instead I'd be writing an analysis on what it is, what the influencing factors are and what the effects tend to be. You can then draw this back to current economic conditions and draw some conclusions from that. I suspect this will get you a better grade.

 

[Hooray]

Hey guys,
I have a uni essay about the cash rate. Just wondering what you guys think will happen. (I know how badly you want to, but please don't write my essay for me)

You haven't actually read the question at all, have you.

 

[Ed Barton]

I'd avoid trying to make a simple prediction in a uni essay about what the cash rate will do.

The essay is not about predicting the OCR.

 

[Strannik]

Do you have to be a responsible board member, or can you be a malicious one?
The latter one will be much more fun while writing. I'm sure your teachers will enjoy reading it too.

 

[spludgey]

The reserve rate should be 4.25% by the end of this year and will steadily keep climbing until it hits 7.75% in 2018.

 

[perthguy]

Your essay should contain an explicit recommendation whether to increase, decrease (by how many basis points) or sustain the level of cash rate.

My recommendation would be to decrease the rate by 25 basis points so that my monthly interest bill is lower

I doubt you would get many points for that. Best bet is to follow the advice above and read the minutes from the last couple of board meetings as a starting point.

 

[Angel]

The reserve rate should be 4.25% by the end of this year and will steadily keep climbing until it hits 7.75% in 2018.

Why? Submit another 1500 words

 

[Sean M]

Personally I think it will come down further. I was previously thinking it would go back up to control housing but the Australian Economy is really struggling from what I can see.

The issue is that the RBA cuts rates in hope that Australians will spend more which in turn will boost the economy. The problem we have is that everyone is paying debt down or saving the money for a rainy day.

Our debts are so huge that if interest rates were to go up by 1-5% I think a lot of Australians would be in deep trouble due to the level of gearing we have.

Thus the effect of cutting rates is not having the same impact to stimulate the economy.

You may know/not know that having a low interest rates is actually a bad sign for the Australian economy where has a high interest shows that we are doing extremely well. It is strange how it all works.

 

[Aaron Sice]

AUD nudging 80c again - expect movement.