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Interest rates: the word on the street

by Marquette Turner

in Money & Business, Real Estate Radar

The Reserve Bank of Australia will hold what could be a historic meeting tomorrow, Tuesday 2 September 2008. Should they decide to lower interest rates, it will be the first time in seven years that the cash rate has fallen after 12 successive rate rises.

Most economists are suggesting there will be a cut by 25 basis points, however, the most bullish are even suggesting 50 basis points for the current cash rate of 7.25%.

This will come as a welcome sigh of relief, and indeed follows the trend of Australia’s mortgage lenders who have in the last few weeks been cutting their fixed rate loans.

The Convenient Truth

So why is this? Without getting too analytical, there are many factors that are leading to such a situation:

Global conditions have snuck up upon the Australian economy probably a little more readily than the RBA expected, which will allow it to loosen its grip on monetary policy somewhat: cutting interest rates therefore mitigates the impact of a deteriorating global economy.

Simon Turner

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