Rate cuts imminent

The Reserve Bank could cut the cash rate as early as next month.
It was not surprising to see the Reserve Bank leave the official cash rate on hold at 3.5 per cent last week, the Board is starting to get more concerned about the slowdown taking place in China and the sharp falls in commodity prices.
The mining boom is losing momentum led by sharp falls in iron ore prices and recent monthly indicators such as retail sales, building approvals and employment growth softening anew it’s likely that growth will slide below trend highlighting the need for lower interest rates.

Standard variable mortgage rates at 6.8 per cent are still well above the 6 per cent or so levels that were required to generate a decent recovery through the last two easing cycles into 2002 and 2009.
I would expect the RBA to cut the official cash rate to 2.75 per cent in the next six months, starting with a 0.25 per cent cut in either October or November.


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