Westpac Banking Corp (ASX:WBC) is expecting the Reserve Bank to cut the cash rate on Budget Day. How should you respond?
The post Will the Reserve Bank cut the cash rate again in October? appeared first on Motley Fool Australia. –
Chief Economist Bill Evans commented: “In a speech on Tuesday, the Deputy Governor of the Reserve Bank gave a fairly clear hint that the Board is set to cut the cash rate and other key policy rates at its October Board meeting.”
This is despite the meeting falling on the same day as the Federal Budget.
Mr Evans explained: “The prospect of the RBA ‘sitting back’ to assess the Budget, which has been seen as the ‘norm’ in previous years is not appropriate for these unique times.”
“We now expect the RBA to cut the overnight cash rate to 10 basis points; to adopt a 10 basis point three year bond target; and to adjust the rate on any new drawdowns of the Term Funding Facility to 10 basis points. All these rates are currently set at 25 basis points, which the Governor has generally described as the effective lower bound for the cash rate,” he added.
When will rates increase again?
If Westpac’s forecasts prove accurate, it will be some time before the cash rate is heading higher again.
The bank is currently forecasting that the cash rate will remain on hold at 0.1% until at least June 2022, which is where its forecast period ends.
In light of this, I think it could be upwards of five years until rates are back to “normal” levels.
As a result, I continue to believe the share market will be the best place to generate an income over the coming years.
But which dividend shares should you buy? Two of my favourite options for income investors are commercial property company and Bunnings landlord BWP Trust (ASX: BWP) and agricultural property company Rural Funds Group (ASX: RFF).
As well as offering generous yields at present, I believe both companies have the potential to grow their earnings and distributions at a solid rate over the 2020s.
Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
- Why the Brickworks (ASX:BKW) share price is soaring higher today
- ASX 200 up 1.5%: Big four banks rocket higher, Premier Investments delivers record profit
- Why ASX bank shares are rocketing up Friday
- Why Adbri, Brickworks, Northern Star, & Westpac shares are surging higher today
- Why the Westpac (ASX:WBC) share price is storming 6% higher
Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post Will the Reserve Bank cut the cash rate again in October? appeared first on Motley Fool Australia.