Is this the end of oz rate cuts?
As Australian Prime Minister Kevin Rudd asked the country's banks to pass on the latest interest rate cuts in full, the Reserve Bank predicted that this cut heralded the end of the spate of big interest rate cuts, with some economists betting it may hold back on further reductions for several months...
Earlier this week, the Australian central bank slashed rates by 100 basic points to a 45-year low of 3.25 per cent, taking total rate cuts to four per cent since September last year.
If all of the Australian banks were to pass on the latest interest rate cut, it would help to inject some liquidity back into the market.
By lowering the cost of buying a property, the cuts are expected to bring buyers back into the market and, by doing so, breathing new life into the struggling property sector.
The latest cuts follow an introduction of a £14.8 billion stimulus package to boost the economy and now the Government is encouraging banks to go one better than they did last time and actually pass on the full benefits of the cuts to desperate borrowers.
Westpac bank has already cut variable mortgage rates by one per cent to 5.91 per cent and it is hoped that the other banks will follow suit.
Is this the end for rate cuts?
Even though an inflation gauge - the TD Securities-Melbourne Institute - rose 0.8 per cent last month, following a 0.2 per cent decline in December, it was not enough to deter the Reserve Bank of Australia (RBA) from cutting rates again this week.
Despite inflation falling within the RBA's two to three per cent target range for the third consecutive month, the rate cut went ahead as planned.
Now some industry experts are betting that this latest cut will be the last, as the Australian Government looks for other ways to bail out the sinking economy.
But, many strongly disagree with these predictions, saying that they expect interest rates to reach two per cent by the latter part of this year, if not earlier, and remain there for the next year or two.
This week, the bank also lowered its economic growth forecast in coming years, predicting that the Australian economy could still follow in the footsteps of other countries and fall deeply into recession before starting to pick up at the end of this year.
Here in the UK, the Bank of England once again slashed interest rates, taking them to an all time low of one per cent yesterday, Thursday February 5th.
Picture by Thiru Murugan