The Reserve Bank of Australia Board meets today to discuss possible cuts on interest rates amidst slow growth in the manufacturing industry and rise in inflation rate. Majority of economists think that the bank should put interest rates on hold.

The Reserve Bank of Australia (RBA) has already reduced interest rates last May to an all-time low of 2.75 per cent. JP Morgan strategist Sally Auld does not expect RBA to announce another cut in interest rates until November of this year.

Cuts depend on future market activity

Auld says plans to cut interest rates will depend on the type of market activity in the next few months in Australia. Interest rates will also be affected with the inflation rate's outlook in July. The RBA will also be looking forward to the depreciation of the Australian dollar.

For more than a year, the exchange rate in Australia remains to be one of the key factors that pressures RBA to cut interest rates.

Shane Oliver, a chief economist at AMP, sees another outcome. Oliver says the Australian economy badly needs a boost today and cutting interest rates will probably in RBA's priority list by the end of the day. He says if the Reserve Bank does not cut interest rates anytime soon, the market might misread its actions and the economy cannot afford a risk like that. It could very well be the reason why the Australian dollar might go back up again.

Slight improvement over the weekend

The release of last month's weak economic data only proves that the economy needs all the help it can get. The exchange rate between USD and AUD has made it past the 0.96 line. The Australian dollar has managed to move away from the negative effects of weak economic data especially the below-normal retail sales sector. The Australian dollar was boosted by the Chinese Manufacturing PMI over the weekend. The company is a major trading partner and for raw materials used in production. When there is high demand for raw materials, the Australian economy reaps the benefits.

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