FYI | Aug 07 2008
By Rudi Filapek-Vandyck
Economists at TD Securities have been among the most bearish in the market when it comes to the Australian economy and the prospects for official interest rate cuts. Their latest update on matters does not disappoint.
Economists Stephen Koukoulas, Eric Lascelles and Joshua Williamson have penciled in a total of 75 basis points in cuts between now and the end of December 2008. On top of this should come another 125 basis points in cuts throughout the first three quarters of calendar 2009.
If these projections prove accurate, the RBA’s official cash rate will decline from 7.25% currently to 5.25% in a little over one year. By then, interest rates in the US are projected to be at 3% (from 2% now), while official rates in Canada should have risen from 3% to 3.75%. In New Zealand, the trend should remain downwards as well, with TD Securities projecting 6% by the end of Q3 next year. Official interest rates across the Tasman are currently at 8%.
The above projections imply that interest rates cuts by central banks on both side of the Tasman Sea could be synchronised from here on.
