Unlikely interest rate cuts

Economists from The Herald Sun say that unless the world economy decides to make a turn for the worse over the coming months, official interest rates are unlikely to be cut by the Reserve Bank of Australia.

Economic improvement
Many economists and consumers were expecting a rate cut during the Reserve Bank of Australia’s February board meeting. However, this expectation did not hold to any avail. Bank loans are currently not desirable, a better option would be to take out quick loans or fast loans. The Reserve Bank of Australia released reports on Tuesday (21st of February) saying that they will not cut official interest rates any further as the global economy is showing signs of improvement.

However, JP Morgan Australia chief economist Stephen Walters said, the RBA had left the door open for another rate cut, if economic conditions called for it. If the fallout from Europe's sovereign debt crisis worsened or if China's economy slowed, they would have to go through with the cut.

Higher chance of cash rate falling
"They are certainly arguing that if policy is going to change, (rates) are more likely to go down than up," he said.

The RBA kept the cash rate steady at 4.25 per cent at its meeting on February 7, after 25-basis-points cuts in both November and December.

"This level of 4 per cent will likely end up being the low point for the cash rate this cycle as the economy picks up speed in 2012 and beyond," Commonwealth Bank senior economist John Peters said.

Although, Mr Peters also said that the Commonwealth Bank is expecting another quarter percentage point rate cut in the next few months, most probably in May.

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