The RBA comes to the party

The Reserve Bank of Australia meets today and economists are predicting that there will be a further cut of 75 to 100 basis points after new data showed pressures receding rapidly.

This will take the official cash interest rate to 4.5 per cent for the first time since June 2002.

Repayments on an average $250,000 home loan would fall by 7 percent to $1662 a month, from $1790, if lenders reduce their standard variable mortgage rates by 75 basis points in December, in line with an RBA move.

AMP Capital Investors chief economist Shane Oliver said the RBA would cut rates by 75 basis points, and keep cutting until the cash rate hits 3 percent by mid 2009, a level last seen in March 1960.

The RBA's biggest concern is that falling confidence will feed through to consumers bunkering down and not spending.

The Central bank has cut two full percentage points off the cash rate in the past three months.

Based on the inflation gauge readings so far, the official consumer price index could drop to an annual rate of 3.5 per cent in the December quarter compared to 5.0 percent at the end of September.

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Published on December 12-nd, 2008 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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