The Reserve Bank of Australia is likely to hold interest rate steady with its focus shifting from inflation to the housing market and household debt levels, economist say.
All 14 economists surveyed by AAP expect the RBA to leave its key interest rate steady at a record low of 1.5 per cent at its February board meeting, the first of 2017, next Tuesday.
AAP's calculation, based on the futures market, currently prices the chance of the central bank cutting the rate at just 2.58 per cent.
Commonwealth Bank economist Kristina Clifton says the RBA won't move because it is much more alert to the risks of a heating housing market after rate cuts in May and August last year, and the weaker Australian dollar providing an effective price cut for foreign investors.
"We expect the cash rate will remain at 1.5 per cent. While inflation remains low, the RBA is clearly concerned that more rate cuts could lead to a further increase in household debt levels which could, potentially, cause financial stability issues," she said.
HSBC chief economist Paul Bloxham says the Reserve Bank is also much less concerned about inflation than it was in 2016.
Consumer price growth was just 1.5 per cent in 2016, below the RBA'S two to three per cent target band.
But, Mr Bloxham, says inflation may be past its trough and a 44 per cent rise in Australia's commodity export prices, which contributed to the highest ever monthly trade surplus of $3.5 billionin January, would eventually filter through to economic growth and wages, and boost inflation.
"The central bank will be tolerant of a below-target CPI, as long as inflation appears to be headed back to target eventually," he said.
"In short, the hurdle for the RBA to cut interest rates is very high at this point in the cycle."
The Reserve Bank will announce its interest rate decision at 1430 AEDT on Tuesday.
