More rate cuts likely, says leading economist

More rate cuts likely, says leading economist

26 February 2013 by Simon Parker 0 comments

Jessica Darnbrough

Despite the Reserve Bank’s (RBA's) optimistic outlook on rates, AMP’s chief economist, Shane Oliver, still expects to see further cuts.

In the Bank’s minutes of its February monetary policy meeting, released last week, governor Glenn Stevens alluded to the fact that he was “quite upbeat” about the current policy setting.

Mr Stevens said there are signs the economy is starting to respond to the round of rate cuts in the second half of last year.

“In response to the weakening in the outlook for economic activity domestically, and with inflation remaining contained, the board had reduced the cash rate by 175 basis points since late in 2011, including by 50 basis points in the last quarter of 2012,” the minutes read.

“Interest rate-sensitive parts of the economy had shown some signs of responding to these lower rates, which were well below their longer-run averages, and further effects could be expected over time.”

But despite the board’s relatively positive outlook, AMP’s chief economist Shane Oliver said he still expects to see further rate cuts in the near future.

“We have heard much talk about the glass half full from the RBA before, so my inclination is still to expect one or two more rate cuts to help boost non-mining activity as mining investment slows,” he said.

Jessica Darnbrough

Despite the Reserve Bank’s (RBA's) optimistic outlook on rates, AMP’s chief economist, Shane Oliver, still expects to see further cuts.

In the Bank’s minutes of its February monetary policy meeting, released last week, governor Glenn Stevens alluded to the fact that he was “quite upbeat” about the current policy setting.

Mr Stevens said there are signs the economy is starting to respond to the round of rate cuts in the second half of last year.

“In response to the weakening in the outlook for economic activity domestically, and with inflation remaining contained, the board had reduced the cash rate by 175 basis points since late in 2011, including by 50 basis points in the last quarter of 2012,” the minutes read.

“Interest rate-sensitive parts of the economy had shown some signs of responding to these lower rates, which were well below their longer-run averages, and further effects could be expected over time.”

But despite the board’s relatively positive outlook, AMP’s chief economist Shane Oliver said he still expects to see further rate cuts in the near future.

“We have heard much talk about the glass half full from the RBA before, so my inclination is still to expect one or two more rate cuts to help boost non-mining activity as mining investment slows,” he said.

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