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Experts divided on possible Australian Reserve Bank rates hike

Xinhua, February 3, 2017 Adjust font size:

Experts have been divided on what the Reserve Bank of Australia (RBA) plans to do with interest rates this year.

Tim Toohey, an economist at Goldman Sachs in Australia, said there is a possibility the RBA will raise their cash rate in November, and has upgraded his GDP growth forecasts in Australia over the coming four years.

"You've got to wonder why people are still looking for multiple rate cuts," Toohey said in an investor note.

"We will need to see some pick up on the consumer side but from the business conditions perspective, we're in the ballpark already."

But not all agree, with Paul Dales, chief economist at Capital Economics, saying on Thursday he expects the RBA will be forced to cut the rates not once, but twice in 2017, from their current 1.5 percent, as inflation and GDP growth will stay lower than forecasts.

"We expect that the RBA's inflation forecasts will prove to be too high. Headline inflation will rise, but overseas inflation is likely to be stifled by the stronger dollar and commodity prices are unlikely to generate higher domestic demand or wage growth," Dales said.

According to Bloomberg, JPMorgan, Macquarie Group and the National Australia Bank are all predicting a 1 percent cash rate in 2017. Endit