6 days ago
Thursday, September 4, 2008
farmdoc's blog post number 137
Nostradamus (1503-1566), born Michel de Nostredame, is arguably the world’s most famous author of prophecies. Best known for his book Les Propheties, he’s credited with predicting the French Revolution, the atom bomb, Hitler’s rise and the 9/11 attacks. Today I’m a Nostradamus try-hard: I wrote this post last Monday, i.e. three days ago, and the day before the Reserve Bank of Australia’s [RBA’s] September Board Meeting when it’ll likely reduce the official interest rate (i.e. the Cash Rate). The $64,000 question is not the rate reductions size, but whether or not the banks will pass on the full rate cut to their borrowers. Only two of the Big Four banks – NAB and ANZ – have publicly stated they will. Consumer group Choice estimates the remaining big banks will profiteer by A$2m for each day they don’t pass on any of a 0.25% rate cut. Choice also says the banks should pass on the full rate cut ASAP ‘as a matter of justice and equity’. I reckon the banks couldn’t give a tuppenny hoot about justice and equity, but marketplace competition’s a supreme motivator. The RBA announced its decision at 2:30 p.m. last Tuesday, so you’ll know it by now. My prediction? A 0.25% official rate cut fully passed on by all major banks, but with an implementation delay of up to a week. Am I right or wrong?
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