The Reserve Bank of Australia (RBA) on Tuesday kept interest rates unchanged, as expected, even as speculation mounts that borrowing rates, already at record lows, could head further south.
The central bank kept rates at 2.5 percent, and maintained its rhetoric for a period of stability for rates.
"I think the RBA has concluded that they've cut interest rates enough. Rates are not a constraint on the economy growing. Yes, the Australian dollar is still too high but that's a function of other things. In the meantime, it's just a matter of waiting for animal spirits to recover in Australia and for growth to pick up," said Shane Oliver, head of investment strategy & chief economist at AMP Capital Investors.
The decision comes as the so-called "lucky country" appears to be losing its Midas touch, as the economy contends with weak growth, slowing inflation and a rising jobless rate, adding to the argument that intervention from the central bank is coming.
On Monday, Deutsche Bank released a report titled "Australia: Change of Call," which predicts the RBA will cut rates by 50 basis points (bps) to 2 percent next year, a shift from its earlier stance of no change.
"After forecasting in early November 2013 that the cash rate would remain at 2.50 percent all through 2014, 2015 and H1-2016, we have in recent months been highlighting the risk of lower interest rates in 2015," Adam Boyton of Deutsche wrote.