THE DISTILLERY: Half cut

Commentators weigh up the likelihood of an interest rate cut and suggest a hold could be justified.

An overwhelming majority of market economists and commentators agree that the Reserve Bank is poised to cut interest rates on the first Tuesday of February. Taking out a little insurance – very little when the big four aren’t expected to pass on all 25 basis points – against a potentially devastating outlook for the eurozone and a softening employment market at home is simply prudent central bank governing, so the theory goes. But The Australian’s David Uren points out that the banks were expected to pass on only 15 basis points last time, but were forced by sheer political force to hand over 25. So, logically, interest rates are lower now than the RBA expected them to be. Why the need to cut? Elsewhere in this morning’s Distillery, darkening outlooks for insurer QBE has one commentator talking about succession for the insurer’s long-time chief executive Frank O’Halloran, while another finds the ACCC’s widely ridiculed concerns over the Metcash-Franklins merger have been somewhat vindicated.

But first we start with The Australian’s David Uren, who tells market economists and other commentators pencilling in a rate cut next Tuesday to perhaps reach for an eraser.

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