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Justin K.
Justin K.
Lindfield West, NSW

A lot of talk about interest rates. Big decision by the RBA next week. What is everyone predicting?

5 years ago


The RBA will lower rates in May due to the low inflation numbers and the Aussie dollar's current exchange rate. If they wait until June it will seem like a political move which is something that the RBA won't want.

Personally I do not believe the RBA will move ....however if they were to move down doubt the banks under there current cost of funding and compressed margins and the pending cash reserve changes would be in any position to pass on.
The current rates available are the best we are going to get .
The occasional fixed rate offering may appear from time to time if you were prepared to forgo your flexibility .
As a famous man once said ....the best time to do anything is NOW ...

With the fixed rates so low, i would consider the savings to be made now. Variable rates are are not likely to get as low as current fixed rates or with any small rate reduction.

Underlying or core inflation is now at the lowest ever rate of around 1.5%, well below the RBA band of 2.0-3.0%, so the RBA is much more likely to cut rates on Budget day.

The RBA may now be thinking (like in the US, Japan and Euro area) that low inflation itself is “the” problem.

Whilst before Wednesday's deflation result I did not think there was any glaring need for interest rates to be cut as the labour market is OK and GDP growth surprised on the upside recently, the issue is the $AU. If the RBA does NOT cut rates in May, it would likely provide further upward pressure on the $AU which would be a net negative.

I reckon rates will be cut to 1.75% on Budget day on May 3rd and I trust the banks will pass on in full.

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