Major sees four rate cuts before year's end

by BN01 Jun 2012

A major bank economist has predicted as many as four more rate cuts before the end of the year.

Westpac chief economist Bill Evans has told Fairfax that the Reserve Bank could drop the official cash rate as low as 2.75% by the end of 2012. Evans said economic conditions are fragile, necessitating deep rate cuts.

"You can't ignore what's going on in the market. There's a fair degree of disquiet. Monetary policy is too tight given the shock to confidence and fragility of the economy. Retail has lost its momentum, house prices have edged off, capital spending is quite soft excluding mining," Evans said.

Evans forecast successive 25bp cuts in June, July and August, followed by one more before the end of 2012.