Further rate cuts still likely: AMP

Staff Reporter

While the Reserve Bank opted to keep the cash rate on hold last week, one economist still expects to see the cash rate fall another 50 basis points before the year is out.

According to AMP’s chief economist Shane Oliver, another couple of rate cuts – taking that cash rate to 2.5 per cent – are still required.

“There were no surprises from the Reserve Bank which left interest rates on hold, but with downwards revisions to its growth forecasts and benign inflation forecasts indicating a clear easing bias,” he said.

“With global conditions improving, China looking stronger, share markets up, house prices starting to rise and the cash rate having fallen by 175 basis points we are likely nearing the end of the easing cycle. However, another couple of rate cuts are still likely to be required.

“The mining investment boom is slowing rapidly and most bank lending rates still look too high to drive a decent recovery in sectors like housing and retail at a time when the Australian dollar remains strong.”

Staff Reporter

While the Reserve Bank opted to keep the cash rate on hold last week, one economist still expects to see the cash rate fall another 50 basis points before the year is out.

According to AMP’s chief economist Shane Oliver, another couple of rate cuts – taking that cash rate to 2.5 per cent – are still required.

“There were no surprises from the Reserve Bank which left interest rates on hold, but with downwards revisions to its growth forecasts and benign inflation forecasts indicating a clear easing bias,” he said.

“With global conditions improving, China looking stronger, share markets up, house prices starting to rise and the cash rate having fallen by 175 basis points we are likely nearing the end of the easing cycle. However, another couple of rate cuts are still likely to be required.

“The mining investment boom is slowing rapidly and most bank lending rates still look too high to drive a decent recovery in sectors like housing and retail at a time when the Australian dollar remains strong.”

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