Little Doubt over RBA Cut by May

April or May? Either way, borrowers may soon get a nice boost to their bank balances with the central bank set to slash interest rates to a new record low.  While economists are divided on which month it’ll happen, all 20 surveyed by AAP expect the Reserve Bank to cut the official interest rate from 2.25 per cent to two per cent by May.

The market has also fully priced in a cut by May, but expectations that the reduction could be delivered on Tuesday have ramped up over the past week on the back of plummeting iron ore prices.  Barclays chief economist Kieran Davies brought forward his rate cut forecast from May to April, citing the Australian dollar’s failure to fall as dramatically as the iron ore price, which last week sank below $US50.  But TD Securities chief Asia-Pacific macro strategist Annette Beacher said it would be more prudent for the RBA to hold fire until May, when March quarter inflation figures will have been released.

It would also give the RBA more time to assess whether measures by regulators to curb property investor activity were actually working, as Sydney’s housing market reaches new record highs in the wake of February’s rate cut, she said.