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Mixed views on next RBA rate move

Mixed views on next RBA rate move

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Staff Reporter

While many industry figures and economists had tipped the November rate cut, it seems there are mixed opinions of which way the Reserve Bank will move next.

Earlier this week the Reserve Bank managed to upstage the Melbourne Cup for the second consecutive year by slashing 25 basis points from the official cash rate, taking the new rate to just 4.5 per cent.

Speaking to Real Estate Business last week, LJ Hooker CEO L. Janusz Hooker said, based on recent history, home buyers may see the RBA follow up the November rate cut with similar moves over the coming months.

“The RBA would not typically make a single move, they will move 100 basis points or they don’t move it at all,” Mr Hooker said.

“They have never in recent history moved it [the official cash rate] less than 100 basis points, so I think they will do a series of 25 or 50 basis point moves.”

Mr Janusz's views are supported by Westpac economist Bill Evans, who said in the Sydney Morning Herald earlier this week that the official cash rate would be cut (in total) by 100 basis points in this cycle. He expects the next reduction to come in February.

Mr Evans was one of a few economists earlier this year to predict the RBA would begin cutting rates.

However not everybody agrees.

Australian Property Monitors senior economist Dr Andrew Wilson said he largely expects to see interest rates climb in 2012, on the back of strong economic growth.

“A fall in interest rates actually gives the Reserve Bank some room to raise rates next year,” Dr Wilson told Real Estate Business.

“It is my guess that we will still get some upward movement in rates next year given the underlying strength of the Australian economy.”

Just where rates are next headed might become clearer tomorrow when the RBA releases its quarterly monetary policy statement.

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Mixed views on next RBA rate move
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