RBA to cut rates by November, says Merrill Lynch

Impending job cuts by a number of major firms are likely to contribute to a decision by the Reserve Bank of Australia (RBA) to cut interest rates in the coming months, according to an expert at Merrill Lynch.

Tim Rocks, strategist at the firm, told the Australian that if 100,000 jobs are lost, as recent information suggests they will be, a one per cent drop in the cash rate would be appropriate.

"The RBA would ease rates once it becomes aware of this new trend in the labour market – we expect this by its November meeting," he said.

However, Mr Rocks warned that the decision could be made earlier than this due to "financial dislocation", which he said could force the hand of decision-makers.

Interest rates are yet to be altered in 2011 by the central bank and they have remained at the 4.75 per cent level set in November last year.

The next decision about the cash rate is set to be announced by the RBA board on September 6th.

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