RBA leaves rates on hold at 2.5 per cent

The Reserve Bank has kept the official cash rate on hold at 2.5 per cent but borrowers are warned to brace for hikes next year.

RBA leaves cash rate on hold

The Reserve Bank has kept the official cash rate on hold at 2.5 per cent but borrowers are warned to brace for hikes next year.

The decision is in keeping with sentiment from RBA governor Glenn Stevens who has said in recent months he's not inclined to cut the cash rate from its current record low.

Mr Stevens also increased expectations that the interest rate cutting cycle was over by delivering an upbeat view of the economy during a speech in Hong Kong last week.

The median forecast for the cash rate at the end of 2015 is 3.25 per cent.

Westpac chief economist Bill Evans said the economy was getting stronger, with the currently weak labour market expected to strengthen in 2015.

HSBC Australia chief economist Paul Bloxham predicts the cash rate will start rising before the end of 2014.

“With activity lifting, inflation already in the upper half of the target band and tentative signs that the labour market is also improving, we expect that the RBA's next move is likely to be up,” he said.

More to come.