Rate cuts still more likely than rate hikes: Westpac

While the Reserve Bank is highly likely to leave rates on hold at their March 4 meeting, and to continue on with this period of stability, it appears that some are expecting a hike by early 2015.

Bill Evans, chief economist at Westpac Bank, said that there is “virtually no chance” of an increase next month, and barely a chance that we will see a movement until the second half of 2014, despite dwelling approvals down, unemployment prospects up and a surprise inflation lift in December.

However, he said that at present, a rate cut is more likely than a rate hike.

“We are more concerned about the growth outlook and still see the prospect of rate cuts being more likely than the current expected rate hike scenario,” he noted.

Investors should be watching the forecasts for 2015 as the ‘key policy indicators’ for the Reserve Bank if they are hoping to pre-empt any movement.

This period of stability is widely expected, and should come as little surprise. Despite this, it appears that fixing home loans as soon as possible is still the suggested approach.

Earlier this month, AMP Capital’s Shane Oliver also agreed that we’re unlikely to see a change until the end of the year.

“We might see rate hikes in the December quarter, perhaps around October. Right now, the economy is still probably not strong enough for an interest rate increase,” he said.

RP Data’s Cameron Kusher agreed with this.

“Any increase in the interest rate won’t happen til the second half of the year at the absolute earliest – most probably late in the year,” said Kusher.

This article first appeared on Property Observer.

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