Will RBA reduce rates by 0.25% or 0.50% in September

It seems fairly certain that the RBA interest rate will be dropping after they meet next week.

Just wondering what people's thoughts were...0.25% or 0.50%


I noticed that the first rate cut in the cycle following a series of rises has historically been 0.50%

Jan 1990 -0.50%
Jul 1996 -0.50% (595 days after last rise +1.00%)
Feb 2001 -0.50% (189 days after last rise +0.25%)
 
Just wondering what people's thoughts were...0.25% or 0.50%
Too hard to say IMO....

....however, my feelings today...

It's expected that the RBA will be cutting ~1% over the next 6-9 months.

A couple of banks have said they will pass on the next RBA cut in full.... I would say they all must follow or risk a serious image problem. There's a lot of publicity about this 1st cut. They've said nothing about following subsequent cuts & there will be a lot less publicity associated with them. So the RBA will make this a big cut (0.5%) and the banks have promised to follow in full. The pollies/RBA win because they coerced the banks to follow in full and the banks avoid -ve publicity by being sympathetic to borrowers (this time). I wouldn't expect subsequent RBA cuts to be followed in full or as quickly, so the banks win with increased margins within 6 months.... everyone comes out smelling of roses.

OTOH, I've read good arguments for no cut this month, it's to hard to say with any certainty.
 
The previous two times the RBA had reduced rates after a series of increases was 0.5%. (April 01: 5.5% to 5.0% & July 96: 7.5% to 7.0%).

There are still some mixed signals around inflation and given two of the major banks said they would pass on the rates cuts in full, I am pretty the other two will follow, so 0.25% for mine.
 
A 0.50% decrease next month will have all the sheeple cheering: "YEWFUGGINBEOOWDEE!" and breaking out the c/c's again because their repayments will have dropped a few hundred per month.

The RBA will go 0.25% and maybe another one the same in Oct.
 
Most likely 0.5% because 0.25% means nothing to the market and people's sentiment

0.5% because:

  1. Media bang for buck
  2. Puts the banks on notice
  3. If they go 0.25% in Sept and then 0.25% in Oct they will be crucified for mucking around.
  4. Only have four months to drop before X mas sales and they traditionally dont move in Dec and take January off.
  5. Banks are already dropping http://www.abc.net.au/news/stories/2008/08/28/2349282.htm

And....

There is no sensible reason not to go 0.5%.

Rise slowly and you are being prudent, but drop slowly...then you are being prudish.

Peter 14.7
 
I agree with Marc - I don't think 'the message' has really got through sufficiently yet. It would be very messy if the RBA had to raise again.

I think they'll stick to .25% for the moment.

Cheers
LynnH
 
0.5%

Historically rates drop twice as fast as they rise. (not that it's the reason for my prediction, just what I read in the papers)
 
.50%. Why?. Economy is slowing fast.......inflation would be only a secondary concern for RBA now, they will be more worried about a recession. My prediction is variable interest rates down 1% by Christmas...ho ho ho.
 
either way - i'm GLAD my worry was for nothing. i didn't fix my rate last time they were left on hold. a 0.5% cut in IRs puts me back inside my buffer.
 
I reckon 0.25 next week and another 0.25 in October...

But I'll be very happy if I'm wrong on this and we get a 0.5 cut next week.
 
I reckon 0.25 next week and another 0.25 in October...

But I'll be very happy if I'm wrong on this and we get a 0.5 cut next week.

I'll bet. But it won't staunch the bleeding, with prices in Narrabeen/Narraweena falling by more per week than the % cut will save you! I've got the complete NSW sales database on my computer, and let me tell you, July and early August have been downright ugly!!!
 
I'll bet. But it won't staunch the bleeding, with prices in Narrabeen/Narraweena falling by more per week than the % cut will save you! I've got the complete NSW sales database on my computer, and let me tell you, July and early August have been downright ugly!!!

I know you have Foundation. Those are the raw stats, right. Scurvy posted them on GHPC a few days ago. Those are the REINSW stats that are not corrected for compositional changes in the sales data. The stats that indicate that more lower-end properties are changing hands, while the higher-end vendors sit on their hands waiting for rates to fall and sentiment to improve.

The stratified hedonic indices provided by ABS and Residex do not show any significant falls.

ABS says Sydney prices rose in Q2. You used to prefer ABS over REINSW... but I guess that was back when their data fitted your point of view better.

I don't have any property in Narrabeen or Narraweena by the way...

I'm looking forward to your new ID 'Frank Slightlyrundownshack' getting validated by Consa. 'Frank C' was relatively amusing tonight. Have fun... bedtime for me. Goodnight.

See ya,

Shadow.
 
I don't have any property in Narrabeen or Narraweena by the way...
I do! And I'm equally unmoved by those lies, lies and bl@@dy statistics... ;)

The general mood around here is definately on the improve. I speak to REAs in the area regularly and they agree that clearance rates are well down and most of the sales are on low end properties where bargain hunters are on the prowl. i.e. the likes of us!! But most of the established market is just sitting tight and watching what happens. There's not much movement at all at the top end with very few listings and a lot of vacant window displays in the REAs.

A few rate drops and you might see some more listings find their way to the market as vendors feel more comfortable asking their desired prices. But for now its just sit tight and wait time.

FWIW, I reckon the RBA will go 25bp in September and probably another 25bp in October too, although I do like KiethJ's logic as to why they could go 50bp off the bat given bank commitments to follow the first one in full. But for that commitment I reckon they'd drop 25bp to send the "in control at the wheel" message and not spook the crowd into thinking they tightened to far and are now rapidly dropping because they've lost control.

We'll know for sure on Tuesday anyway! And BoomTown can then pay up his beer bet with me "if" they drop!! :D

Cheers,
Michael
 
0.25% is my guess. I think the RBA has finally pushed their message through, and they aren't going to let us off the hook that easily.

That said, ALL of my loans are full variable, so a 0.5% wouldn't hurt me...
 
Median Stats on prices are best described as wide ranging general guide of that month only.

I was buying and developing in Ultimo during the City West Program days in 1990's. Old established units were $150K for one bed. New was $235k. Bunch of new units sell and bingo, prices rose 50% in three months.

Peter 14.7
 
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