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Economist dismisses talk of Tuesday rate cut

Amid whispers that the Reserve Bank will cut rates before the end of the year, BetaShares’ chief economist believes a rate cut as early as tomorrow is unlikely.

David Bassanese said that while the lower-than-expected September quarter consumer price index (CPI) result gives the RBA added flexibility to cut interest rates should the economy require it, it does not compel a rate cut for this month.

This reflects several factors, according to Mr Bassanese, including that the nearer-term economic outlook “remains encouraging”, with business confidence buoyed by the new Turnbull government and job advertisements still holding up.

“There still remains dark clouds on the horizon, with a looming drought, higher bank capital costs forcing up mortgage rates, a potential near-term peak in housing construction and still bleak business investment outlook,” he added.

“The RBA may well want to reserve some ammunition to deal with these challenges as we head into 2016.”

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