Interest rates are being cut by most central banks all over the world in order to recharge economies. If the predictions from the financial markets are to be believed, the Reserve Bank of Australia is all set to cut interest rates as well. The Reserve Bank is going to convene its board meeting for the month on Tuesday and it is expected that a cut in the cash interest is likely to take place. According to reports, the cash interest rate is going to be reduced from 1% to 0.75% in the board meeting tomorrow. In this regard, it is important to note that the Reserve Bank has already made two interest rate cuts in 2019 so far.
Experts believe that interest rate cuts help in stimulating the economy significantly and many in Australia believe that the previous two rate cuts have already proven to be quite effective. Ross Greenwood, the finance editor of the leading television networks in the country, said as much. Greenwood said,
Interest rate cuts in June and July have had an impact on the capital city property markets – in particular in Melbourne and Sydney. Auction clearance rates are up and the prices themselves are up.
Hence, it is not a surprise that there is a widespread belief that the Reserve Bank is all set to ease monetary policy further. The governor of the Reserve Bank Philip Rowe seemed to indicate last week that another rate cut might be necessary in order to continue the growth experienced through the earlier cuts.
He had also stated that due to the weakness in the global economy, there are genuine threats that could lead to a slowdown in domestic growth and rise in unemployment. The financial fraternity is expecting another cut on Tuesday and many analysts have indicated that to their clients. The chief economist at AMP Capital, Shane Oliver stated in a note to his clients that a rate cut is imminent. He said,
We remain of the view that the RBA will cut rates again on Tuesday and now see the low point being 0.25 percent in February next year.
The slowdown in China has not been a particularly good thing for the Australian economy, considering the fact that the Asian nation is its biggest trading partner. It remains to be seen how the latest cuts affect growth.