Where to for rates?

Sunday, March 2nd 2008, 9:18PM

by Philip Macalister

This week much of the attention is on the Reserve Bank and what it does with interest rates. A cut is out of the question and it seems a rise, although suggested by some, is a long shot too.

A bigger question is when will the central bank start cutting? Until recently the view was very late this year or early next year. However, little signals are appearing which suggests there is a slim chance cuts could come earlier.

I suspect when cuts come they could be bigger and deeper than many predict. No doubt the government is hoping for earlier rather than later with a general election due around November.

On that note it was interesting to see the Prime Minister’s comments that the government is not expecting a property crash (nor does it want one!)
She is spot on here.

As for the market itself. Well you have ASB chief economist Nick Tuffley advising buyers to be patient - prices are likely to tumble in the next 12 months, he says.

Yet discussions I have had with real estate agents suggest that vendors have over-inflated expectations on price and there are already a bunch of bargain hunters out there.

Vendors wanting to sell will have to drop their prices making this a good buying period for investors.
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