Interest rate cuts 'are even less likely'

Mozo

Friday 10 August 2012

The chances of the Reserve Bank of Australia (RBA) cutting interest rates any further in 2012 appear to be slim.

According to the bank's latest report, the nation's economy is set to expand at a faster pace than originally expected, the Australian Associated Press reports.

It now thinks gross domestic product will grow by 3.5 per cent in 2012, which is up by 0.5 per cent from the RBA's last forecast in May.

CommSec chief economist Craig James recently wrote for Advisor Voice that one more 25 point rate reduction could happen by the end of the year, but the central bank's latest announcement appears to suggest that this won't be the case.

The RBA said that the economy was going along nicely, but also acknowledged that events in the eurozone could change things.

"In general it's a fairly upbeat statement – their medium-term growth forecasts are pretty much what they were in May and, in the short-term, growth is stronger and inflation is lower," HSBC chief economist Paul Bloxham was quoted as saying.

Interest rate cuts 'are even less likely'

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