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Banks cutting rates regardless of RBA movements

by Staff reporter7 minute read
The Adviser

With less pressure now on the RBA to cut the cash rate, the central bank should "keep its powder dry", says Deloitte Access Economics.

In a business outlook report released yesterday, Deloitte said its prediction is partly due to cheap global funding, which means “the banks are already cutting rates anyway”.

Deloitte said the Australian dollar has also taken a lot of pressure off the RBA.

“Central banks such as the Reserve Bank worry more about rates being too low than they do about them being too high,” it said.

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With below-trend growth and larger forces at play in the global economy, Deloitte believes property prices are becoming less of a concern for the central bank.

The firm said the RBA will “want to keep some of its powder dry”, or refrain from cutting rates in case Australia’s challenges mount further.

However, Westpac chief economist Bill Evans remains confident of a rate cut at the board meeting.

Since it changed its view on December 4 last year, Westpac has consistently argued that the RBA will cut the cash rate by 25 basis points at this February's meeting.

 [Related: Speculation grows ahead of rates decision]

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