Rate cuts are highly possible by Christmas, according to some economists. While the Reserve Bank of Australia (RBA) is not expected to move rates tomorrow at it's August meeting, many economists forecast a rate cut by November. While rate relief would bring a happy Christmas present to many Australians, predictions are only of 0.5%
Macquarie Group strategist Rory Robertson says the Reserve Bank may look to cut rates in September and there may even be a small cut tomorrow.
"It now is obvious to almost everyone that extremely tight financial conditions are bringing the Australian economy to a screeching halt,'' he said.
Officially, Macquarie Group says rates will stay on hold through to the March quarter but the investment bank's chief economist Richard Gibbs said the RBA would cut rates in September, and again in November or December, if the central bank's monetary policy statement due out next week talked down the economy.
Today there were indications that the economy is slowing as a fall in newspaper and internet advertisements for the third consecutive month is reported.
Just two weeks ago, ANZ was forecasting a rate rise in November but now agrees that the RBA will most likely signal reductions in rates during 2009. The Commonwealth Bank of Australia is the only major bank predicting a November interest rate rise, based on fluctuations in petrol prices.
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