 Interest Rate Predictions
Some economists have been convinced for some time that the cut will be up to one per cent, but with data released last week showing the economy is still in dire straits, there are some experts saying the cut could be as much as 1.5 per cent.
Slumps in housing prices worry the government and building industry. Consumer confidence is low and many businesses are recording a loss in profits.
So just what are the experts predicting?
“This data certainly adds to the case for a 100-point cut ... rather than something less,” BankWest chief economist Alan Langford
"...even before the IMF's gloomy predictions out overnight, effectively for a global recession, economists here were tipping more dramatic rate cuts and also with yesterday's confirmation that inflation pressures are easing, economists are factoring in a one percentage point cut when the Reserve Bank meets next Tuesday." ABC business editor Peter Ryan.
"The Reserve Bank over the last couple of months has surprised all and sundry with the size of its cuts – you can't rule out even a 1.25 percentage point cut," Commonwealth Securities senior analyst Craig James
"The market is pricing 100 basis points, but I think they will go for more," Credit Suisse economist Damien Boey.
"...the RBA would slash interest rates more aggressively in 2009 than it did during the last recession, starting with a 75 basis point cut next week. We have taken the view global deflation is more of a threat in 2009 than the early 1990s recession,'' UBS economist George Tharenou
“The January result for the inflation gauge is unlikely to discourage the RBA from cutting the cash rate by 100 basis points,” TD Securities senior strategist Joshua Williamson
"The news has been so dismal that they almost have to cut by 100 basis points, and an even bigger move can't be ruled out," Michael Workman, a senior economist at Commonwealth Bank.
Home Loans
Whatever the cut today, home owners will be hoping the banks pass on all of the cuts to mortgage rates. A cut of 100 basis points would save someone with a $300,000 mortgage around $200 a month. And there are also calls for credit card interest rates to be lowered. The RBA meets this afternoon to discuss official interest rate and an announcement is expected by 2.30pm AEST.
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