Further Interest Rate Cuts?

My concern is the European sovereign debt crisis and its potential knockon effects on the global economy and locally (via its potential deleterious impact on the Asian economies and on diminished local business and household confidence etc).  I don’t think another 0.25% cut in the coming months, probably by February 2012 would be too radical a move.

By delivering 50 bps pretty quickly (i.e. with another 0.25% cut by QI 2012 after the early November cut in the cash rate to 4½%), such a move would buy RBA more insurance against downside shocks to growth as it further assesses growth prospects globally and at home as Euroland developments further unfold. Financial markets are factoring in multiple (i.e. 4) RBA rate cuts by mid 2012. Markets fully expect a 0.25% rate cut in December, with a further three 0.25% cuts to 3½% by mid 2012.

Long overdue in my opinion



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