Rate cuts on cards following US downgrade

Monday 08 August 2011

Article by Mozo

The downgrading of the US's credit rating by Standard & Poor has caused stock markets around the globe to tumble and more interest rate cuts may be pushed through by the Reserve Bank of Australia (RBA) as a result.

US credit downgrade could force down Australian interest rates

Good news for homeowners, but less favourable for those using the internet to compare savings accounts, the RBA said it would only drop rates dramatically if the chances of a global recession rose.

However, an unprecedented economic disaster would be required to force the institution into action, economists believe.

Commenting on the uncertain economic outlook, NAB chief economist Alan Oster told the Herald Sun: "The RBA will be sitting on hold for a long time as the economy is running too fast with core inflation outside the bank's target zone."

"Armageddon would need to be coming for the RBA to cut rates by so much so soon," he concluded.

Last week, the RBA slashed its growth forecast by an entire percentage point, but reiterated that Australia's economy is still healthy.

Get more information on the latest Reserve Bank interest rates with Mozo.ADNFCR-1761-ID-800693173-ADNFCR

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