Rates to stay low for another year

Economists and financial markets expect the Reserve Bank of Australia to cut official interest rates by a further 0.25 per cent to 2.75 per cent by August. However, a rate cut in June is rated unlikely with markets putting the odds of such a move at about 34 per cent. Futures market investors expect rates to dip to a low of about 2.6 per cent by October before gradually being raised again through 2010.

Many economists disagree with that view and expect rates to bottom out at about 2 per cent and stay low during 2010. Interest rate strategist Rory Robertson from Macquarie Bank said rates could fall below 2 per cent as the RBA seeks to deliver further stimulus to the economy over the next two years. UBS chief economist Scott Haslem says rates will fall to 2 per cent by the end of the year as unemployment rises to 7.5 per cent.

Source: The Australian Financial Review