Official Rate Cut Looks Increasingly Likely

Posted on 23/05/2019  
Official Rate Cut Looks Increasingly Likely

The Reserve Bank of Australia appears poised to slice official interest rates, with governor Philip Lowe indicating it will be on the bank's agenda next month.

In a speech to the Queensland branch of the Economic Society of Australia in Brisbane, Lowe said that without a reduction in interest rates it was unlikely the bank's forecasts for lower unemployment and a lift in inflation would be met.

Declaring that Australia could "do better" than have an unemployment rate around 5%, he said there were few options for the RBA but to consider a rate cut.

NAB has brought forward its forecast for a cash rate cut and now expects the Reserve Bank to act in both June and August, with a third 25 basis point movement to below 1% possible in early 2020.

The nation's fourth biggest lender says an unexpected uptick in the jobless rate provides further evidence the economy has softened more than the RBA expected.

Coupled with weak inflation for the March Quarter, as well as subdued business and consumer sentiment, NAB says April's jobs figures will force the central bank to take action at its June 4 board meeting, and again in August.

The RBA has kept the cash rate has at a record low 1.5% for nearly three years but it has faced mounting pressure to act in the hope of kick-start stagnating economic growth.

Meanwhile, Commonwealth Bank-owned Bankwest is slashing its three-year owner-occupier mortgage rate as lenders chase an ever-decreasing number of suitable home loan customers.

The Perth-based lender will cut its principal and interest rate for owner-occupiers by half a percentage point to 3.48%, which product comparison service Canstar says is the lowest in the market.

NAB-owned UBank is cutting its three-year fixed owner-occupier rate to 3.59% from 3.74%, while ME this week trimmed its equivalent rate from to 3.73% from 3.94%.

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