Westpac expert forecasts RBA rate cut in December

The Reserve Bank of Australia (RBA) is likely to reduce interest rates by 25 basis points in December, according to an expert at Westpac.

Andrew Hanlan, senior economist at the financial institution, told the Herald Sun that the central bank's view of Australian consumers is "overly optimistic".

He suggested that the decline in retail sales and increase in unemployment levels will push the RBA to cut rates by the end of the year.

"We expect more downside surprises combined with falling home prices over the coming months will force the RBA to act," Mr Hanlan asserted.

The cash rate is currently at the 4.75 per cent level set in November 2010, when the RBA increased it by 25 basis points.

Governor of the RBA Glenn Stevens and the board of the bank are set to meet on Tuesday September 6th to decide if any further changes are required this month.

Interest rates reached a 15-year high in March 2008 when the RBA pushed them up to 7.25 per cent, a level they remained at for six months.

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