Rates could now be in for a cut rather than the two hikes forecast by most economists earlier in the year.
That's according to Westpac's latest interest rate prediction, which says the market is now pricing in a 25bp decrease by October, with a 50% chance of another cut by February of next year. The bank's chief economist, Bill Evans, has forecast a sequence of rate cuts, beginning in December and following throughout 2012, to leave rates 100bps below their current level.
Evans said the first rate move wouldl come due to deteriorating global conditions, including the Eurozone debt crisis. The following cuts, he said, would be in response to domestic weakness outside the mining sector. Unemployment is expected to rise, while business and consumer confidence remain soft, Evans said.
This information is provided by DPN Pty Ltd ABN: 94 630 700 186 Australian Credit Licence 514759. DPN Finance Pty Ltd is an authorised credit representative 504129 and related entity of DPN. Credit for Dream Big 100% Offset and Work Smart 100% Offset is provided by Adelaide Bank a division of Bendigo and Adelaide Bank Ltd, ABN 11 068 049 178 and Australian Credit Licence 237879. Casa Capace Operations Pty Ltd, NDIS provider number 4050038018 trading as Casa Capace.