Further interest rate cuts a real possibility.

Wednesday 22 May 2013

Article by Mozo

Following yesterdays minutes of the May meeting of the Reserve Bank of Australia (RBA), the general consensus amongst economists remains that another interest rate cut in 2013 is very likely.

Interest rates cut below record

It is widely believed that the most recent interest rate cut was an attempt by the RBA to resurrect the currently below average confidence in the non-mining business sector and restore an over valued Australian dollar that has been hampering the market.

The minutes hint that a common theme in the RBA's unpublished liaison feedback is that the high Australian dollar is causing pain in the corporate world, said Stephen Walters, chief economist at JP Morgan.

Inflation is expected to remain relatively low and economists believe that this will give the RBA ample room to cut rates further. A back-to-back cut in June does not seem likely and the market is pricing in a cut for September or October, report the News Limited Network.

However, Westpac chief economist Bill Evans is still confident that rates will drop as low as 2 percent in the current cycle.

Record low interest rates and speculation of further cuts is sparking high competition amongst Australia's banks, eager to secure now home loans. Since interest rates were cut to 2.75 percent at the beginning of May a number of lenders have announced monumental rate cuts to their products and are offering significantly reduced rates on mortgages. Borrowers can compare the market to find the best home loans on Mozo.

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