The case against a rate cut

The case against a rate cut. I think there is clearer evidence than there was late last year that the extended period of record low interest rates is having the sort of effect that the Reserve Bank wants to see. We're also starting to see clearing signs of hiring and investment in some other labour-intensive sectors of the economy ... such that it's possible now to believe that the unemployment rate will peak, probably a little higher than it is at the moment, later this year. And from that point of view, there's probably not much to be gained from cutting interest rates even lower than they already are. (Also) We calculate that the roughly 50 cent per litre fall in retail petrol prices over the past six months has a similar impact on household cash flows to an almost 50 basis point reduction in interest rates. So why would the Reserve Bank double up on that?


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