Is another rate cut in the offing?

WILL they, or won't they.

That is the question many are asking as the Reserve Bank of Australia (RBA) meets to consider its official lending rate on Tuesday afternoon.

Homeowners and retailers would certainly welcome a cut.

A 25 point reduction would save the average household $50 a month.

Retailers would also be happy. They have had a campaign leading up to Christmas warning that they may have to lay off staff if there is not another cut in the bank rate.

And those market watchers who are sensitive to the Eurozone would also see a reduction as prudent - with Europe on the brink, Australia needs to be ahead of the game if the markets collapse next week.

However other analysts - and the big four banks - would probably prefer the RBA leave matters as they stand.

They argue that a 25 basis point cut would be insignificant in the event of a Eurozone crash, and that the cut would be wasted if in fact the various European leaders managed to stablise their economies in the next few days.

Ultimately the situation in Europe is likely to determine what the RBA will do. If the Bank thinks Europe is on the right course with its latest efforts, it is likely to shy away from a cut and elect to keeps its powder dry.


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