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Economists get interest rates wrong

09/02/2012

Most economists had misjudged the RBA's first interest rate move this year, expecting a 25 basis point cut, but still expect rate cuts later in the year.

Macquarie analysts argued yesterday that there was still “a need to lower rates,” and pointed to “employment growth in 2011 was the weakest since 1992.”

Traders in financial markets have factored in a rate cut of 25 basis points to 4 per cent at the RBA's meeting next month, giving it a 60 per cent probability.

Economists surveyed by Bloomberg now expect official rates to fall 50 basis points, in two separate movements, this calendar year before beginning to rise again next year.

Source: The Australian



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