Mitsubishi UFJ’s Shimomura Sees RBA Rate Dropping to 2%

Hideo Shimomura, who helps oversee the equivalent of $76.4 billion in Tokyo as chief fund investor at Mitsubishi UFJ Asset Management Co., part of Japan’s largest publicly traded bank, comments on Australia interest rates.

The Reserve Bank of Australia held its target for overnight bank loans at 3.5 percent yesterday.

Policy makers are is waiting to see how their 1.25 percentage points of reductions from November to June affect the economy, Shimomura said.

“They have to cut again,” he said yesterday after the RBA decision. “We could see a series starting in October or November. Domestic demand is still quite weak. The currency level is still high, and import prices are tame. There’s not a lot of inflation pressure, and it gives the RBA room to cut.”

The Reserve Bank will reduce its key rate to 2 percent in 12 months, he said. That would be the lowest on record. He predicts the yield on the 10-year note will fall to 2.4 percent by Dec. 31 from its current level of 3.33 percent. That would also be an all-time low.

Australian retail sales climbed 1 percent in June from May, the most since March, according to government figures released on Aug. 2. They stopped growing at the end of 2011 and declined in April.

Prices for imported goods increased 2.4 percent in the second quarter from the prior three months, rebounding from a 1.2 percent decline in the first quarter.

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