Half per cent rate cut for March

Market expectations of a 0.5 per cent rate cut firmed yesterday to a 100 per cent certainty after the release of the Reserve bank Board minutes yesterday. The chances of a 0.75 per cent rate cut are rated at about 20 per cent.

The Reserve bank has signalled that it may take a more cautious approach to rate cuts in the future as it waits to see the impact of the federal government's economic stimulus package.

The bank expects demand to pick up in the second half of the year and commodity prices to stabilise. However mounting evidence of a global recession, including a significant fall in Japan's gross domestic product, are cited by the bank as reasons for concern about the domestic economy.

Source: The Australian Financial Review