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Uncertainty over today's rate movement

By webmaster 05 June 2012 | 1 minute read

Industry experts are unsure over whether or not the Reserve Bank will cut rates again at its Board meeting later today.

According to Smart Property Investment’s sister publication, The Adviser’s, latest straw poll, 50.7 per cent of brokers believe the RBA will cut rates again today, while 49.3 per cent believe the Board will hold fire.

The results correspond closely with a new survey conducted by Loan Market Group, which found 55 per cent of brokers believe there will be no movement in the official cash rate today.

Of the remaining respondents, 38 per cent believe there will be a 25 basis point cut, while 7 per cent are expecting a 50 basis point cut.

“There's a lot of stuff up in the air. China is slowing down quite a bit, domestic numbers have been quite soft in some spots and mining has carried us through. So there’s a lot of debate out there on how all this is going to come together and that does make it pretty tough to really see what the RBA is going to do on a month to month basis,” Loan Market spokesperson Paul Smith said.


But while brokers remain uncertain about the future of the cash rate, the share market collapse overnight has forced many economists to pencil in a June rate cut.

Last night, Australian shares closed at a six-month low with an estimated $23 billion wiped off the market.

AMP chief economist Shane Oliver said the share market debacle combined with other data should encourage the Reserve Bank to cut rates.

“Our view is that the RBA should and will cut rates by another 0.5 per cent [today] as conditions have worsened substantially since the last Board meeting and the RBA needs to be bold to get ahead of the worsening outlook in order to bolster the economy,” Mr Oliver said.

“Europe is threatening to implode, China is slowing more than expected - a fact acknowledged by Governor Stevens – and this is taking the edge off the mining boom and the non-mining economy is struggling very badly.

“And of course the inflation outlook remains benign. But whether it’s this month or next, the cash rate will go lower, ultimately falling to around 2.75 per cent by year end.”

Uncertainty over today's rate movement
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