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RBA tipped to hold rates into new year

AAP logoAAP 5/12/2016

The Reserve Bank is likely to chill out over the summer by leaving its rates unchanged until the middle of next year, economist say.

All 12 economists surveyed by AAP expect the RBA to leave rates steady at a record low of 1.5 per cent at its December board meeting on Tuesday.

AAP's calculation, based on the futures market, currently prices the chance of the central bank relieving borrowers - at just 2.48 per cent.

JP Morgan chief economist Sally Auld said there was widespread consensus of a rate hold and that analysts would focus on Reserve Bank governor Philip Lowe's comments on recently released economic data.

"The commentary is also expected to stick largely to script, with the Bank reiterating the well-established themes of the past few months," she said.

"That said, it will be worth keeping a close eye on how the Bank views developments in Australia's terms of trade, as well as the labour market."

Citi economists said recently weaker-than-expected economic data prints including the official wage price index, capital expenditure and employment figures, as well as the weaker Australian dollar, would keep the RBA on the sidelines on Tuesday.

"Governor Lowe is likely to take the advice of former Governor Glenn Stevens and chill out for at least a few months over the Australian summer," they said in a note.

However, the Citi economists warned that a soft labour market into the new year could trigger another interest rate cut in the first half of 2017.

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