Four more interest rate cuts predicted for 2012

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How does a 1% interest rate cut sound to you? According to an economist from one of the country’s Big Four banks, the RBA could spring four more interest rate cuts on the Aussie public this year. But will the lenders follow suit?

Westpac chief economist Bill Evans has told Fairfax that the Reserve Bank could drop the official cash rate as low as 2.75% by the end of 2012 – representing four 0.25% rate cuts, including the one announced this week by the RBA. Evans said economic conditions are fragile, necessitating deep rate cuts.

"You can't ignore what's going on in the market. There's a fair degree of disquiet. Monetary policy is too tight given the shock to confidence and fragility of the economy. Retail has lost its momentum, house prices have edged off, capital spending is quite soft excluding mining," Evans said.

As well as this month's recently announced 0.25% cut, Evans has forecast successive 0.25% cuts in July and August, followed by one more before the end of 2012.

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