You will know that we have been talking about rates coming off as early as this year for a while now - it's contrarian but it doesn't mean the RBA won't; in our latest newsletter we have even touted the cash rate being 75bp lower in 2012 than it is now!
The reality is that with confidenec being as low as it is, the only thing that is likley to stimulate property and retail spending is an interest rate reduction or a change of government. Seems we aren't the only ones now, Ian Simpson from smartline has his finger on the financial pulse and I have referred to him before. I just received his latest thoughts on rates - supported by what the futures market think will happen, in other words what they have priced in...
Ian says, "The ASX Futures Market has had a fairly dramatic change of heart when it comes to the RBA cash rate over the last fortnight.
The chart below indicates the money market thinks that there is a strong chance the RBA cash rate will drop by 0.25% by October. There is even a 50/50 chance that rates may fall by a further 0.25% in April 2012.
The high Aussie Dollar is starting to take its toll on some sectors of the economy and the European debt crisis is not going away. Only yesterday we saw how tough retailers are doing it with David Jones reporting disastrous trading results.
As a result of this negative sentiment, the market is factoring in a need for the RBA to stimulate the economy rather than slow it down.
On the bright side, the underlying health of our economy is not as disastrous as it may seem (low unemployment, low inflation, high savings rates) so I think an interest rate cut or three will vastly improve this negative sentiment".
You might want to give some thought to getting back into the property market and talking to us about how we can help.
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