The Reserve Bank’s decision on Thursday to leave interest rates on hold will not please those in the market who had expected the second 25 basis point cut in a cutting cycle that began with July’s monetary policy committee meeting. The committee clearly had a robust debate, perhaps an unusually robust one, given that three of its members favoured a 25 basis point hike, with the remaining three preferring to hold. And on the numbers alone, it was surely a close call. The Bank’s forecast for inflation is unchanged at 5.3% for 2017 and it has revised the forecast up only slightly to 5% and 5.3% in 2018 and 2019, with a lower turning point of 4.6% still expected in the first quarter of 2018. Nor is the Bank fooled by the apparent bounce in the economy in the second quarter – it still expects very weak growth, with an updated forecast of 0.6% for this year, only slightly higher than the previous 0.5%, and no change to the forecasts for the next two years. True, 5% is still above the mid-...
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