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ISCOVER
Staff reporter
Falling interest rates have had little impact on consumer confidence as the case strengthens for the RBA to cut rates further in February.
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The latest Westpac Melbourne Institute Index of Consumer Sentiment has registered a modest increase of 2.4 per cent in January to 97.1 per cent up from 94.7 in December.
Westpac's Chief Economist, Bill Evans described the increase as “somewhat disappointing” after RBA cut the overnight cash rate by a total of 50bps with the major banks passing on the full cut to variable rate mortgage borrowers in November and December last year.
But while consumer sentiment remains flat Mr Evans was quick to reinforce the importance of last year’s rate cuts.
“Given ongoing financial turmoil in Europe; a flat housing market and further weakness in the labour market sentiment is likely to have been lower without the rate cuts,” he said.
Mr Evans has tipped the RBA to further loosen monetary policy next month with the potential for further cuts to follow.
“We expect the Board to cut the overnight cash rate by a further 0.25% completing three consecutive meetings when the overnight cash rate has been reduced. Even at 4% there is ample scope for the Board to go further given the benign outlook for inflation. Indeed, we expect a follow up move in May”, Mr Evans said.
