ANZ cuts rates by 0.27%

ANZ bank has cut its home loan interest rates by 0.27 of a percentage point - more than cuts made by its big rivals and by the central bank at its May board meeting.

The cut takes ANZ's standard variable rate on mortgages to 6.13 per cent, the same as that offered by National Australia Bank.

The Reserve Bank of Australia cut the cash rate by a quarter of a percentage point on Tuesday, and NAB, Westpac and Commonwealth Bank all made an identical cut to their rates.

CBA's standard variable rate is 6.15 per cent, while Westpac offers 6.26 per cent.

ANZ Australia chief executive Philip Chronican said lower overall funding costs had allowed the bank to cut by more than the RBA's cut.

"This month we reviewed a range of factors including the Reserve Bank's decision to decrease the official cash rate this week, our competitive position and a recent easing in the cost of our wholesale funds," he said in a statement.

ANZ's new rate is effective from May 17.

Its rates on business loans will be cut by a quarter of a percentage point.

The central bank's cash rate now stands at 2.75 per cent.

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Euro gains after ECB rates unchanged

THE euro strengthened against other major currencies on Thursday after the European Central Bank decided not to cut interest rates.

At 2200 GMT (0900 AEDT) the euro was trading at $1.3107, up from $1.2971 late on Wednesday. The euro also rose sharply against the Japanese yen, trading at 124.28 yen, up from 122.00 yen late on Wednesday.

As expected, the ECB decided to leave its interest rates unchanged at 0.75 per cent, its lowest level in history.

However, ECB chief Mario Draghi told a news conference that the bank weighed possibly cutting rates further before deciding on the status-quo move.

"Yes, we discussed the possibility of doing it. But the prevailing consensus was to leave rates unchanged," Draghi said.

With inflation in the 17-country eurozone currently expected to remain in line with the ECB's goal of close to, but just under, 2.0 per cent, "this will allow our monetary policy stance to remain accommodative," Draghi said.

The bank president offered a somewhat hopeful appraisal of the economy, predicting that economic activity would "gradually recover" later in 2013.

At the same time, the ECB released projections that showed the eurozone economy contracting by 0.5 per cent in 2013 before recovering to grow by 1.0 per cent next year.

The previous forecasts in December penciled in a contraction of 0.3 per cent this year and growth of 1.2 per cent in 2014.

In spite of Draghi's comments, "there is little hard evidence to support Mr Draghi's optimism," observed BK Asset Management managing director Boris Schlossberg.

Schlossberg said the euro's strength against the dollar "may prove to be fleeting if the the eurozone economic data does not show some signs of improvement relatively soon."

David Song, currency analyst at DailyFX, said the dollar could see renewed strength with Friday's release of the monthly nonfarm payrolls for February.

The data "may increase the appeal of the dollar as job growth is expected to pick up in February," Song said.

The dollar gained against the Japanese yen, trading at 94.83 yen late on Thursday, up from 94.04 late Wednesday.

The pound lost ground to the dollar, trading at $1.5012 on Thursday from $1.5017 on Wednesday.

The dollar traded lower to the Swiss franc, trading at 0.9425 Swiss francs, compared with 0.9482 a day earlier.

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RBA's high dollar a factor in cutting rates

CBA governor Glenn Stevens is expected to reiterate CBA is ready to cut the cash rate in a meeting with MP's

Make: CanonModel: Canon EOS-1D Mark IIIDate/Time: 2008:05:06 13:31:30

THE Reserve Bank is keeping an active watch on the strength of the Australian dollar when setting interest rates.

RBA governor Glenn Stevens today told a parliamentary committee the exchange rate was still higher than would be expected considering the official cash rate is at record low of 3 per cent.

Future rate cuts remain under active consideration, he said as the economy is likely to grow a little bit below the level of 2012.

But Mr Stevens was upbeat the rate cutting cycle that has seen official rates drop by 1.75 per cent since November 2011 was having an "effect'' and the property market was showing signs of recovery.

"Housing prices have been rising since last May, having declined for a period prior to that,'' he said. "Share prices have also risen quite significantly and, if anything, by a little more than in comparable markets overseas."

"The returns available to savers on safe assets like bonds and bank deposits have fallen by enough to prompt Australian savers to consider shifting their portfolios towards other assets.

"These are channels of monetary policy at work,'' Mr Stevens said.

He also said the high level of household savings was a good thing and more normal than the pre-GFC period when household debts outstripped savings levels.

"Households do not feel the same ebullience they did for some years prior to the financial crisis in major countries. But that degree of confidence, with its associated patterns of saving and increasing leverage, was unusual, and is not likely to recur,'' he said.

The RBA governor also admitted that while the eurozone has avoided catastrophe it is still faces immense challenges that could derail the global outlook.

But Mr Stevens was upbeat the US economy was on the road to recovery and was as likely to surprise on the upside as it was to shock on the downside over the coming 12 months.

Meanwhile, the RBA said the mining investment boom is close to its peak.

Mr Stevens said he expected investment in the mining sector to peak soon, though it would remain at elevated levels for some time.

"Looking ahead, it appears that the peak in the level of resource sector investment is now close," he said. "It is a very high peak, but we do not think that there will be a rapid decline in the near term after the peak."

Mr Stevens said investment spending in other parts of the economy remained subdued but would strengthen following the peak in the mining sector.

"Investment spending by businesses in other sectors has thus far remained somewhat subdued in comparison," he said. "There are good reasons to expect it will strengthen in due course, but the available indicators at present do not suggest that is going to happen in the very near term."

With AAP.

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