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Rates tipped to fall again in February

By webmaster
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Continued uncertainty abroad could force the Reserve Bank to cut rates again early in 2012.

AMP's chief economist Shane Oliver said if uncertainty persists in Europe, the Reserve Bank will likely cut rates in February 2012.

"In Australia, the Reserve Bank cut interest rates for the second month in a row citing Europe, tougher financial conditions, cautious behaviour on the part of households and businesses and reduced pressure on inflation. Mortgage rates have only just returned to being a bit above their average over the last decade but given the uncertainties now prevailing they ideally should be lower. We expect global uncertainty and constrained household demand to result in further rate cuts next year, with the next move likely coming in February," he said.

"The RBA was right to cut rates this month as economic data found while the third quarter GDP growth was solid at 1 per cent quarter on quarter, this largely reflects surging mining investment in Western Australia and Queensland. Outside of these states final demand was virtually flat.

"On top of this employment fell in November with full time employment falling by nearly 40,000 jobs and the TD Securities/MI inflation gauge for October indicated that inflationary pressures remain benign."

Mr Oliver said while there has been much debate about bank mortgage rates, at the end of the day the RBA will adjust its cash rate in order to get the mortgage rate levels that it wants.

"If the banks don't pass on the full amount of any RBA move then it will just have to move the cash rate by more. So while the whole issue might affect the timing of when people see their mortgage rates change, it won't ultimately affect the level they get to," he said.

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