Rate cut aimed to boost con­fi­dence

Port Douglas & Mossman Gazette - - FRONT PAGE -

AN­OTHER round of in­ter­est rate cuts later this year re­mains on the agenda af­ter the Re­serve Bank clearly sig­nalled it re­tains an ‘‘eas­ing bias’’ de­spite this month slash­ing the cash rate to a record low, econ­o­mists said.The May rate cut of 0.25 per cent to 2.75 per cent seems to have been aimed at boost­ing con­fi­dence in the busi­ness sec­tor by driv­ing down the Aus­tralian dol­lar, rather than boost­ing con­sumer spend­ing.The min­utes from the cen­tral bank’s May board meet­ing re­leased yes­ter­day show that with a ‘‘sur­pris­ingly low’’ in­fla­tion read­ing, which was ex­pected to keep it within its tar­get range of 2 to 3 per cent for the next few years, more cuts are a real pos­si­bil­ity.The fu­tures mar­ket is al­ready pric­ing in an­other cut to of­fi­cial rates in Septem­ber or Octo- ber, be­ing the last in this cy­cle, with the RBA tipped to start lift­ing them again to­wards the back end of 2014. West­pac chief econ­o­mist Bill Evans said he re­mained ‘‘con­fi­dent’’ that in­ter­est rates would drop to a low of 2 per cent in this cy­cle.

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