RBA waiting game keeps spectre of out-of-cycle cuts alive

by Adam Smith05 Mar 2013


The RBA has once again met widespread expectations in choosing to leave rates on hold, but its deicision has raised the spectre of out-of-cycle cuts by banks.
The Reserve Bank again left the cash rate untouched at 3% when it met this afternoon. Governor Glenn Stevens cited "slowly increasing" housing investment and strengthening resources exports in continuing the Bank's wait-and-see approach.
But the move keeps alive the spectre of out-of-cycle rate cuts by lenders. UBS analyst John Mott last week claimed that easing funding pressures and growing profitability on mortgages meant out-of-cycle cuts would become "inevitable". He claimed banks would risk "political interference" if they didn't pass on lowered funding costs to consumers.
But Loan Market spokesman Paul Smith said it was "too early" to expect banks to move their variable rates independent of the RBA. But he did concede that consumers were likely to see "strong competition" in the coming months as banks jockey for position in offering low rates.