The Reserve Bank is walking a precarious tight-rope with interest rates. The economy is weak and cutting interest rates would seem to be a good way to boost economic activity. But with interest rates already at record lows and housing prices and housing debt already at record highs, further cuts may only serve to create a housing bubble that is in danger of bursting and destroying our economy with it.
All suggestions are that the Reserve Bank will cut rates again. The market is so sure that rates will be cut that it is actually pricing in 2 cuts – all the way down to 1.75% by October.
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