It Is Expected That RBA Will Cut Its Interest Rates Again This March
As per the survey by top economists, it is expected that Reserve Bank will cut its interest rates again this March. According to their forecast by AAP, RBA will deliver at least one more rate cut in 2015, taking the cash rate to a new record low of two per cent.
Commonwealth Bank senior economist Michael Workman said, “Usually when they cut rates, they don’t just do one out of the blue and stop. It’s normally two”.
Few reasons for RBA to cut rate:
- Unemployment has hit a 12-year high of 6.4 per cent, business investment expectations have reached shockingly weak levels and cheap petrol is expected to push inflation below the RBA’s two-to-three per cent target band.
- On top of that, the Australian dollar has been edging higher, touching 79 US cents this week.
Mr Workman said, “The currency moving up is equivalent to wiping out the beneficial effects from lower interest rates. It impacts quite severely on anybody that competes with imports and it also tends to make you, as a consumer, see overseas travel as cheaper and purchases over the internet as more cost effective.
The combination of low interest rates and a currency closer to 70 US cents seems to be the RBA’s preferred option.
Westpac chief economist Bill Evans said, “one rate cut alone would not be sufficient to support demand, and would seem too timid a response.”
The cash rate would certainly be cut by May, but a March cut would make more sense he said, and the RBA should clearly leave the door open to further cuts.
News Source: https://au.finance.yahoo.com/news/rba-expected-cut-rates-again-044908432.html