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Oliver's Insights - Why the RBA should cut rates again

 01 December 2011 - This note looks at the outlook for interest rates.


The key points are as follows:

  • The increasing threat from the Euro-zone debt crisis, rising bank funding costs and increasing fiscal drag following Federal Government belt tightening, all against a benign inflation backdrop justify further monetary easing in Australia.
For the Reserve Bank of Australia (RBA) to wait to February before cutting interest rates again would be high risk. A further 0.25% cut in the cash rate (taking it to 4.25%) at its December meeting is justified and further rate cuts are likely to be required next year.
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