Interest Rate Updates
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May Announcement 2015May 05, 2015
After keeping the cash rate steady at it’s past two reviews, today RBA Governor Glenn Stevens announced the board decision to lower the cash rate by 25 basis points to 2.0 per cent. Taking into account the inflation outlook, the Board identified an opportunity to ease monetary policy as a means to reinforce recent encouraging trends in household demand.
While the global economy continues to expand at a moderate pace, commodity prices have trended downwards - with some declining quite significantly. These trends seem to reflect, most significantly, an increase in supply from several nations, Australia included. Despite this increase in exports, Australia’s terms of trade are declining.
Financial conditions globally remain accommodative. Long-term borrowing rates for sovereigns remain remarkably low, likewise for overall financing costs for creditworthy borrowers. The Federal Reserve is expected to begin upping its policy rate later in the year, but this is expected to be countered by other major central banks stepping up the rate of unconventional policy measures, and thus the global financial market is expected to remain accommodative.
Looking closer to home, Glenn Steven’s has stated the available information suggests an improvement in Australian household demand trends over the most recent six month period, along with improved growth in employment.
Weak capital expenditure is expected in both the mining, and non-mining sectors, over the coming year, and this is likely to be key element holding back private demand. The RBA expects public expenditure to also be subdued, and the economy is therefore likely to continue to operate with a degree of spare capacity for the foreseeable future. Despite our lower exchange rate, inflation is still forecasted to remain consistent with the target over the coming one to two years.
Credit is continuing to show moderate overall growth as lending to businesses strengthens. Our low interest rates are also acting to support borrowing and spending. In the housing market dwelling prices have continued their upward trend in Sydney, with results mixed in a number of other cities. Growth in lending has been steady over recent months. The RBA continues to work with external regulators to identify and contain any risks in the housing market that may arise.
Looking into other asset markets, prices for commercial property and equities have been supported by our lower long-term interest rates.
Over the past year the Australian dollar has declined against the strengthening US dollar, although less so against several other major currencies. The RBA suggests further depreciation of our dollar is both likely and necessary, due to the steep declines in key commodity prices.
While the cash rate was decreased by 25 basis points at this review, Glenn Stevens has not indicated an expectation for coming reviews.
RBA Summary April 2015April 08, 2015
The Reserve Bank of Australia (RBA) Governor Glenn Stevens today announced the cash rate would again remain unchanged at 2.25 per cent.
In a similar press release to his March statement, Governor Stevens again highlighted the continuing strengthening of the US economy, and the slowing growth of China when compared with last year’s outcome. Moderate global growth is still expected for 2015.
With the price of oil in particular much lower than it was a year ago (as a result of both decreased demand, and significant increase in supply), commodity prices on the whole have declined over the past year. Resulting from these lower energy prices, the RBA expects a strengthening in global output and lower CPI inflation rates for the short term. In exports Australian terms of trade are continuing their decline as prices for key exports have fallen.
In finance markets conditions are accommodative globally, with long-term borrowing rates for several major sovereigns at record lows. Likewise, overall financing costs for creditworthy borrowers remain at noteworthy low levels.
In our domestic market a range of indicators suggest that Australian GDP growth continued at below-trend pace, with domestic demand growth overall quite poor - resulting from decreases in business capital expenditure. This has in turn effected unemployment rates, which have inched higher over the past year despite an upswing in employment growth. The RBA expects our economy to continue to operate with a degree of spare capacity for the foreseeable future.
Consistent with this ongoing spare capacity in the labour market, and continued pressure on employers to contain costs, wage growth is expected to remain subdued. With this, it appears likely that inflation will remain consistent with the target over the next one to two years. This is expected even with a lower exchange rate.
Credit is showing moderate overall growth. Lending to businesses has experienced growth recently and, while neither appears to be picking up further at present, growth in lending to investors in housing assets has been stronger than to owner-occupiers. Dwelling prices continued to increase strongly in Sydney, but with mixed results elsewhere in the nation. Partially resulting from declining long-term interest rates, prices for equities and commercial property have also risen.
In the currency market over the past year the Australian dollar has declined significantly against the strengthening US dollar, but this decline has been less noticeable against a myriad of other currencies. However, given the significant decline in key commodity prices, the RBA predicts further depreciation, and a lower exchange rate is expected to be needed to achieve balanced economic growth in the future.
While the cash rate remained steady at the April review the board has highlighted that an easing of policy may be appropriate over the period ahead in order to generate sustainable growth in demand, and inflation consistent with the target.
April 2015 AnnoucmentApril 07, 2015
At its meeting today, the Board decided to leave the cash rate unchanged at 2.25 per cent.
- Cash rate 2.25%
- Inflation rate 1.7%
The market was tipping a decrease of between 0.1 and 0.25 basis points, we will keep you updated. Here were the market odds.
- Decrease by 0.26% or more $11.00
- Decrease by 0.01% to 0.25% $1.62
- Stay the same $2.20
- Increase by 0.01% to 0.25% $51.00
- Increase by 0.26% or more $101.00
We will have a full update on the annoucement when it becomes available.
Rates Steady March 2015March 28, 2015
Having eased monetary policy with a 25 basis point (0.25%) decrease in official interest rates at the February review, in his March statement Reserve Bank of Australia (RBA) Governor Glenn Stevens announced the board decision to hold the cash rate steady at 2.25%. However, his statement did suggest a further easing of policy may be appropriate over the period ahead as a means to foster sustainable growth in demand, and inflation consistent with the target.
Global economic growth continued at a moderate rate in 2014, with a similar performance expected by most observers in 2015. The US economy continues to strengthen on the back of growth in private demand (in particular business investment) and strong growth in consumption, supported by further improvements in labour market conditions, decreased gasoline prices and accommodative monetary policy. China’s growth has slowed a little from last year’s outcome.
Commodity prices have declined over the past year, with the price of oil in particular dropping significantly. The declines appear to result from a combination of lower demand growth and, most importantly, significant increases in supply. These low energy prices will act to strengthen global output, and lead to lower CPI inflation rates in the near-term.
In the finance markets conditions are accommodative globally, with long-term borrowing rates for several major sovereigns at record lows over the past few months. Overall financing costs for creditworthy borrowers remain low despite some risk spreads widening.
In our domestic market a range of indicators suggest that Australian GDP growth continued at below-trend pace, with domestic demand growth overall quite poor. As a result, the unemployment rate has increased gradually over the past year, despite an upswing in employment growth. Consistent with ongoing spare capacity in the labour market, and pressure on employers to contain costs, wage growth is expected to remain subdued. With this, inflation is also expected to remain consistent with the target over the next one to two years - even with a lower exchange rate.
Housing credit is recording growth for both owner-occupiers and housing investments, with around 6 per cent, and 10 per cent increases in six-month ended annualised terms respectively. Dwelling prices continued to increase strongly in Sydney, and to a lesser extent Melbourne, but price rises in other parts of the country remained modest, with some cities experiencing a price decline.
The RBA is currently working with other regulators to understand and contain risks that could arise from the housing market. In terms of other asset markets, prices for equities and commercial property have risen, partly resulting from declining long-term interest rates.
While the Australian dollar has declined notably against the strengthening US dollar, the decline has been less significant against a host of other currencies, and remains above most estimates of its fundamental value - especially given the significant declines in key commodity prices. A lower exchange rate is expected to be needed to achieve balanced economic growth in the future.
Rate Decrease Feb 2015Feb. 03, 2015
The RBA today announced 25 basis point (0.25%) decrease in official interest rates from 2.5% to 2.25%. The reduction is aimed at stimulating demand in the economy as the inflation rate has fallen to 1.7 per cent which is below the target inflation rate of between 2 to 3 per cent.
The decline has been largely blamed on a decline in commodity prices which has effected the mining sector in particular. The decline in the price of oil also resulted in a significant drop in inflation which was a contributing factor to the decision.
The decrease in interest rates is likely to spark increased interest in the housing market as rate increases are unlikely in the foreseeable future. At Rate Detective, we have been inundated today with a number of clients requesting to fix loans as well. A lot of the major banks are yet to announce their movements, so we suggest to clients to contact us and we will monitor over the next week or two movements in the banks fixed and variable interest rates to find you the most competitive product.
Cash Rate Stays at 2.5 Per Cent in OctoberOct. 08, 2014
Australia's cash rate remains unchanged at 2.5 percent, said Reserve Bank of Australia (RBA) Governor Glenn Stevens in a statement released earlier today.
Overall, the global economy posted continuous growth. Economic growth of China is seen to slow down in recent months, but remains in line with the policymaker's objectives, said Mr Stevens. Prices of commodities further declined, but the weakening property markets may pose a challenge in the coming months.
In general, the RBA sees growth to be "a little below trend" in the next few months, with markets showing low chances of posting any increase in interest rates as long-term rates and risk spreads have remained very low. Overall, figures suggest that Australia maintains its moderate economic growth.
Data show unusual changes in the labour market. While employment seems to improve this year, growth in wages significantly slowed down, and it will take a long time before a consistent decline in unemployment rate can be seen. The country's unemployment rate is at 6.1 per cent as of 11 September, which is slightly lower than the previous month's 6.4 per cent.
The strong US dollar has led to a decline in the exchange rate. However, it is high based on historical standards since prices of key commodities continue to decline.
In the next couple of years, inflation is predicted to remain steady at 2-3 per cent target. The accommodative monetary policy is expected to continue to "provide support to demand and help growth to strengthen over time." According to the Board, monetary policy is designed to promote sustainable growth in demand and inflation rate which are proved to be consistent with the target. With the current data, it is likely that interest rates will remain stable in the coming years.
RBA Maintains Cash Rate at 2.5 Per Cent in SeptemberSept. 03, 2014
In today’s monetary policy statement, Reserve Bank of Australia (RBA) Governor Glenn Stevens announced the Bank’s decision to leave the cash rate at 2.5 per cent.
The statement hardly differed from previous ones given by the Governor. For one, the Reserve Bank continues to expect the country’s growth to be “a little bit below trend over the year ahead” due to the decline in investments in the resources sector and the moderate growth expected from capital spending despite an improvement in investment intentions from other sectors. On a more positive note, Business Conditions in July rose to 8 from the previous 2 and Business Confidence went up to 11 from the previous 8, while Consumer Confidence in August went up by 3.8 per cent, which previously went up only by 1.9, and the Consumer Confidence Index during the same month went up to 98.5 from the previous 94.9. Mr Stevens said that these are suggestions that “moderate growth in the economy is occurring.”
Meanwhile in the labour market, the Governor noted the rise in unemployment. The country’s unemployment rate rose in July to 6.4 per cent from the previous 6.0 per cent. Full time employment grew by 14,500 and part time employment fell by 14,800 during the same period. He said, however, that “the labour market has a degree of spare capacity”, which meant that it may take some time “before unemployment declines consistently.” In addition, he said that “[g]rowth in wages has declined noticeably and is expected to remain relatively modest over the period ahead,” which should help maintain the Bank’s inflation target despite the lower levels of the exchange rate.
Mr Stevens also mentioned that the low interest rates has led to increased competition among lenders. Lenders have been aggressive as of late with a series of cuts in their interest rates despite the lack of cuts from the RBA since last year. Of note was the decision of the country’s three largest banks to cut their three-year fixed rates at under 5 per cent, in a bid to attract more customers. These banks were The Commonwealth Bank, National Australia Bank, and Westpac. The effect of these cuts is yet to be seen, as home loans in June has grown only by 0.2 per cent, while investment lending for homes during the same month fell by 0.3 per cent.
Most recently, businesses helped with the increase in credit growth, said Mr Stevens. He also added that “[t]he increase in dwelling prices continues. Most recent figures show that the country’s House Price Index for Q2 went up by 1.8 per cent over the previous quarter, and by 10.1 per cent over the past 12 months.
The dollar continues to be overpriced according to the Governor despite the decline in key commodity prices. He said that the dollar’s value offers “less assistance than would normally be expected in achieving balanced growth in the economy.”
Overall, the Reserve Bank sees that the current monetary policy “should provide support to demand and help growth strengthen over time.”
Cash Rate Remains at 2.5 Per Cent in AugustAug. 07, 2014
As expected, Reserve Bank of Australia (RBA) Governor Glenn Stevens said in a statement that the Bank would maintain rates at 2.5 per cent in August.
Mr Stevens painted a fairly positive picture of the Australian economy, while keeping everyone’s expectations as realistic as possible. The statement has been consistent with the previous statements he has given in the previous months, including the expansion in housing construction where he said “strong expansion” is now under way. While building permits fell by 5.0 per cent in June over the previous month, it has gone up by a whopping 16.0 per cent over the past 12 months.
There was also mention about the continued and significant decline in investments in the resources sector. The Governor said while that there are signs indicating a desire to invest in other sectors, “these plans remain tentative” as businesses prefer a wait and see approach before starting to invest heavily. Overall, however, Mr Stevens said that the RBA expects “a little below trend” growth in the near future.
As for unemployment, more time is expected before it “declines consistently” even if there are signs of improvement over the past several months. While inflation has recently been on the rise, Mr Stevens said that modest growth in wages would help temper its effect.
With the cost of dwelling prices, the Governor said that it has been “slower” compared to the previous year, although it still continues to rise.
The tone was firmer with regards to the exchange rate this time. Instead of merely indicating that it remains high by historical standards despite the declines in key commodity prices, Mr Stevens said that it is “offering less assistance than it might in achieving balanced growth in the economy.”
RBA Cash Rate Steady at 2.5 Per Cent in JuneJuly 14, 2014
Australia’s cash rate remain unchanged at 2.5 per cent, according to Reserve Bank of Australia (RBA) Governor Glenn Stevens’ statement earlier today.
Overall, Mr Stevens gave a positive outlook of the country’s economy. He said that although the growth of China’s economy -- to which the economy of Australia is closely connected -- has slowed in the early part of the year, it “remains generally in with policymakers’ objectives.”
He also added that this year’s economic growth has been “somewhat firmer” compared to last year. Mr Stevens presented several reasons for this, including strong increase in the resources exports, although he also mentioned seeing “smaller increase in such exports” in the coming quarters.
In addition, he noted a moderate growth in consumer demand and foresees a “strong expansion” in the country’s housing construction figures. This reflects the forecast made by the Australian Construction Industry Forum (ACIF), which sees an average annual growth of 2.3 per cent from the period of 2013-14 to 2022-23, which will peak around 2017-18, but will grow moderately after that.
As for Australia’s labour market, the Governor said that although there have been some improvement in its indicators, it may take time before a consistent decline in unemployment will be seen. In April, the country’s unemployment rate has remained steady at 5.9 per cent, 11,561,400 jobs have been added, and 723,800 have been lost, according to the Australian Bureau of Statistics.
Inflation, meanwhile, is seen to be within the RBA’s 2-3 per cent target in the next two years.
When it comes to lending, Mr Stevens said that the while the current interest rates are very low, he also noted that these rates have even gotten lower for some borrowers over the past several months. And although there was an increase in house prices over the past year, he said that there are signs that it has slowed down recently.
RBA Leaves Cash Rate Unchanged in MayMay 08, 2014
The Reserve Bank of Australia (RBA) announced earlier today that it would leave the cash rate at 2.5 per cent.
Unemployment in the country has risen over the past year, although there have been signs of improvement in recent months. The rate hovered between 5.4-5.8 in 2013, but shot up to 6.0 in February and March this year. It then went down to 5.8 in April, which translated to a growth in employment by 18,100. According to the RBA, however, “it will probably be some time yet before unemployment declines consistently.”
Other areas in the economy remain a mixed bag, such as the country’s trade balance, which fell under the market’s expectations as it came out at 731 million instead of 1,200 million in March. This was due to the 2 per cent contraction in exports and imports that remained flat during the period. The Australian dollar, meanwhile, has rallied over the past several months, eliciting a positive reaction from the stock market. The RBA isn’t as positive about the value of the dollar as it said that, “[t]he exchange rate remains high by historical standards.”
As for inflation, a recent report revealed that it fell in Q1, but remains within the preferred level by the RBA. This has been due to the decline in the growth in wages. “Inflation is expected to be consistent with the 2-3 per cent target over the next two years,” according to the RBA’s statement.
The most apparent effect of the record-low cash rates has always been the growth in demand for home loans. Although building permits in March have fallen by 3.5%, it has been up by 20% over the past 12 months.
All in all, the cash rate is largely seen to remain at its current level in the foreseeable future, at least until the economy shows a more sustained and more consistent growth.
Australia Cash Rate Stays at 2.5%April 01, 2014
The Reserve Bank of Australia (RBA) said that it would maintain current cash rates in its monetary policy statement released today. RBA Governor Glenn Stevens said in the statement that the Bank decided to keep rates at 2.5% because the monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. He added that having a period of stability in the rates is the "most prudent course".
As with previous statements, the RBA's view of the global and local economy remain consistent. On a global scale, Mr Stevens said that although the economy was a "bit below trend" last year, the Bank remains optimistic of a recovery this year.
Meanwhile, the Australian economy grew slower than expected in 2013. Mr Stevens noted, however, that there was an increased consumer demand over the summer, and that he foresees a growth in housing construction. There are also indicators of improved business conditions and confidence, and a rise in exports. Investments in the resources sector "is set to decline significantly", and investment from other sectors "are only tentative" at the moment, as businesses await more proof that business conditions have improved.
Mr Stevens also said that demand for labour has "remained weak", leading to higher unemployment figures. The RBA sees it rising "a little further", which could curb inflation with their target rate.
As for the Australian Dollar, the RBA Governor once again mentioned that the currency "remains high by historical standards". This came after the aussie's value rose over the past few weeks on the country's positive economic data, such as the huge increase in fulltime employment in February. However, the wording was weaker than in previous statements, particularly those made late last year, where the Bank said the currency was "overvalued".
Overall, however, the RBA remains optimistic about the effect of its "continued accommodative monetary policy". Mr Stevens said that it "should provide support to demand, and help growth to strengthen over time".
Cash Rates Stay at 2.5%March 04, 2014
The Reserve Bank of Australia (RBA) announced today that it will maintain cash rates at 2.5%. According to his statement, RBA Governor Glenn Stevens said that the current monetary policy is "appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target." Thus, the Board concluded that keeping rates in the foreseeable future is "the most prudent course".
The statement differed little from what the RBA said in the previous months. First, they noted the accommodative financial conditions worldwide. They also added that the United States and the European Union, and Japan are showing signs of growth and recovery. Meanwhile, growth in China "remains in line" with the objectives of policymakers.
In Australia, Mr Stevens pointed out the "slightly firmer" consumer demand in the country, which is a sign of "a solid expansion in housing construction." There are also improvements in the country's business conditions and confidence, as well as its number of exports. The RBA also maintained that investments in the resources sector are "set to decline significantly." Although there are signs of increasing investment from other sectors, Mr Stevens said that that is only tentative. All in all, he said, "public spending is scheduled to be subdued."
There is also the continued rise in the country's unemployment rate, and a decline in the growth in wages. "If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate."
The RBA expects that the unemployment rate will continue to rise. In the long term, however, they expect growth to strengthen with the aid of low interest and exchange rates. They also foresee the inflation rate to remain with their 2-3% target in the next two years.
Meanwhile in other areas, here is what Mr Stevens had to say:
"Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth remains low overall but is picking up gradually for households. Dwelling prices have increased significantly over the past year. The decline in the exchange rate seen to date will assist in achieving balanced growth in the economy, though the exchange rate remains high by historical standards."
Cash Rate in Australia Stays at 2.5%Feb. 05, 2014
Governor Glenn Stevens of the Reserve Bank of Australia (RBA) announced earlier today that the Bank would maintain rates at 2.5%.
The RBA, which met for the first time this year, generally delivered the same statement it had over the past few months.
However, absent from the statement was the RBA's thoughts on the Australian dollar. During a number of his previous statements, Governor Stevens said that the dollar remained 'uncomfortably high'. Rather, he focused on the growth in the country's consumer demand, in housing construction, and its economy in general. In addition, he said that there is some improvement in indicators of business conditions and confidence.
The RBA's outlook on the country's economy and unemployment remained consistent with its previous statements. Governor Stevens had this to say:
"[W]ith resources sector investment spending set to decline significantly, considerable structural change occurring and lingering uncertainty in some areas of the business community, near-term prospects for business investment remain subdued. The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. Growth in wages has declined noticeably."
The Governor also noted the higher-than-expected increase in inflation in December. He said that it may be due in part to the faster than expected effects of the lower exchange rate. He noted, however, that "domestic prices also continued to rise at a solid pace, despite slower growth in labour costs."
Cash Rate Stays at 2.5%, AUD Still Uncomfortably HighDec. 03, 2013
As expected, the Reserve Bank of Australia (RBA) announced that it would maintain rates at 2.5%. The announcement was made by RBA Governor Glenn Stevens through a statement. Today's meeting is the last for the RBA this year. The next one will be in February 2014.
In his statement, Governor Stevens said that the Australian economy has been growing "a bit below trend", as the country adjusts to lower levels of mining investment. While the RBA hopes that other industries would pick up after the mining sector, the Governor said that "considerable uncertainty surrounds this outlook".
There has been an improvement in terms of household and business sentiment, but Governor Stevens mentioned that "it is still unclear how persistent this will be".
As for inflation, it is "consistent with the medium-term target". The RBA expects it to remain that way in the next 1-2 years.
The full effects of the RBA's monetary policy are still coming through, according to the Governor. Although there have been signs of increased demand for finance by households, he said that "the pace of borrowing has remained relatively subdued".
Governor Stevens also made mention of the Australian dollar's current value. As with previous statements, the he said that the bank still sees it as "uncomfortably high".
Overall, today's statement differed little from previous ones given out over the past few months.
Some analysts say that the 2.5% interest rate would remain throughout the rest of 2014, which would then be followed by an interest rate hike some time in the first half of 2015. However, it is still too early to find out whether it is the case or not.
RBA Keeps Cash Rate UnchangedNov. 06, 2013
Reserve Bank of Australia (RBA) Governor Glenn Stevens said in a statement today that the RBA decided to keep rates unchanged at 2.5 per cent.
Not much has changed in the statement as compared to Mr Stevens' previous ones. For one, he said that unemployment in Australia continues to rise. "This is likely to persist in the near term, as the economy adjusts to lower levels of mining investment."
Meanwhile, inflation is well within the RBA's medium-term target. They expect it to remain so in the next one to two years.
Despite the rounds of rate cuts over the past few years, Mr Stevens said that: "[t]he full effects of these decisions are still coming through and will be for a while yet."
Demand for finance by households grew, even if in general, borrowing is "subdued". This means that more and more Australians have been taking advantage of the low rates that were the consequence of the cuts made by the RBA.
A slight difference in previous statements is in the Reserve Bank's growing concern over the value of the Australian dollar. Mr Stevens said that: "while below its level earlier in the year, is still uncomfortably high". He added that: "a lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy". He did not explain further how the RBA will plans to achieve this.
In closing, the Governor had this to say: "[a]t today's meeting, the Board judged that the setting of monetary policy remained appropriate. The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target."
This could mean that the RBA would still consider further rounds of cuts in the future as needed. Of course, an increase in rates cannot be discounted entirely as well.
RBA Keeps Rate at 2.5%Oct. 01, 2013
Once again, the Reserve Bank decided to maintain the cash rate at 2.5%.
Little has changed in the RBA’s statement, which was delivered by RBA Governor Glenn Stevens.
According to Mr Stevens, Australia’s economy, “has been growing a bit below trend over the past year.” As with earlier statements, he said that the RBA expects this to continue due to the “lower levels of mining investment”. He also mentioned the increasing unemployment, and that inflation “has been consistent with the medium-term target.”
The Governor also mentioned that there has been an improvement in household and business sentiment indicators, although he said it is “too soon” to determine if the trend will persist.
As for the RBA’s easing in monetary policy over the past two years, he said it has helped “interest-sensitive spending and asset values”. But Mr Stevens said that the full effects of these decisions are still coming through, and will be for a while yet.” He added that the pace of borrowing “remained relatively subdued”, and that there is “a shift in savers’ behaviour in response to declining returns on low-risk assets.”
Also, the RBA still prefers a weaker Australian dollar. “A lower level of the currency than seen at present would assist in rebalancing growth in the economy.”
Based on these factors, the RBA decided that the current rate remains “appropriate”. Mr Stevens closed his statement by saying that, “the Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target.”
RBA Cuts Rates by 25 bpsAug. 06, 2013
The Reserve Bank of Australia (RBA) announced a 25-basis-point cut in cash rates earlier today. This brought down rates to a new record-low of 2.5%.
RBA Governor Glenn Stevens said in his statement that, "the Board has previously noted that the inflation outlook could provide some scope to ease policy further, should that be required to support demand." Based on their meeting and on the recent domestic and international economic data, the Board decided that, "a further decline in the cash rate was appropriate."
At a global level, the Board saw that "financial conditions remain very accommodative," although there was a marked rise in sovereign bond yields. In addition, there was an increase in volatility in financial markets, affecting several emerging market economies in the process.
In the domestic economy, the Governor said that it, "has been growing a bit below trend over the past year." The trend is expected to continue as the levels of mining investment lowers. Also, unemployment rate in Australia has increased, although inflation has been within the RBA’s medium-term target.
The lower cash rate, "has supported interest-sensitive spending and asset values." Although borrowing has yet to pick up, the Governor said that, "recently there are signs of increased demand for finance by households."
The Australian dollar has seen a massive drop against the greenback over the past few months, "although it remains at a high level." A further drop in its value, "would help to foster a rebalancing of growth in the economy," according to Mr Stevens.
The rate cut was in line with analysts' expectations after a weak performance from China and a stronger greenback over the past few months. Another round of cut is expected later this year, which analysts speculate could happen in November or earlier. The RBA hinted at this as well, as Mr Stevens also mentioned that the RBA will, "continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time."
RBA Keeps Rates at 2.75%July 02, 2013
The Reserve Bank of Australia (RBA) announced today that it will maintain the cash rate at 2.75%.
RBA Governor Glenn Stevens echoed previous statements that, "the easier financial conditions now in place will contribute to a strengthening of growth over time, consistent with achieving the inflation target."
According to him, this was the reason the Board decided that, "the stance of monetary policy remained appropriate for the time being. [It] also judged that the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand."
Mr Stevens also mentioned the current economic conditions in Australia, which, "has been growing a bit below trend over the recent period." He pointed to the lower mining investment, which has been the country's main economic driver in the past. In addition, the Governor also spoke about the rising unemployment rate and the moderation of the growth in labour costs.
Meanwhile, Mr Stevens also spoke about the increased demand for finance by households despite the generally subdued pace of borrowing in the country.
There was also mention about the Australian dollar as he did with previous statements. The Governor said that the aussie has depreciated by 10 percent since early April, "although it remains at a high level." He mentioned the possibility of the exchange rate depreciating further in the future as well. This would, "help to foster a rebalancing of growth in the economy."
On a global level, Mr Stevens said that the, "financial conditions remain very accommodative." He added that, "a reassessment by the market of the outlook for monetary policy in the United States has seen a noticeable rise in sovereign bond yields from exceptionally low levels. Volatility in financial markets has increased and there has been some widening of credit spreads."
The RBA previously cut cash rates by 25bps in May, bringing the rate to its lowest level since the RBA began setting monetary policy. Analysts still expect another round of 25bps cut within the year, which could bring down the rate further to 2.5%.
Cash Rates Remain at 2.75%June 04, 2013
The Reserve Bank announced no rate cut in its monetary policy decision this month. The rate thus remains at 2.75% after last month's 25bps cut?
In his statement, RBA Governor Glenn Stevens said that the Board decided that its stance in the monetary policy "remained appropriate for the time being." He also added that the current inflation outlook "may provide some scope for further easing."
At an international level, Mr Stevens said that the financial conditions are "very accommodative." Meanwhile, he also mentioned that growth in the country has been "a bit below trend." He added further that the unemployment rate in the country has increased over the past year, while the outlook on inflation is expected to remain consistent with the Reserve Bank's medium-term target. The RBA also expects it to stay that way over the next one to two years.
Mr Stevens also made mention of the previous cut's effect on the exchange rate. Although it has resulted to the depreciation of the Australian dollar, the RBA Governor said, "it remains high considering the decline in export prices that has taken place over the past year and a half." The statement echoed that of the statement the Reserve Bank made last month.
The cash rate thus remains at 2.75%, which is the lowest so far since the RBA began setting monetary policy. Analysts foresee another round of a 25bps cut within the year, which would lower rates further to 2.5%.
All in all, the RBA's statement has changed little, if at all, since their last announcement. Again, the inflation rate remains consistent with their outlook, unemployment has risen, and the value of the Australian dollar remains high. Now it remains to be seen whether the Reserve Bank would need another round of cut within the year, and if so, how it would impact the country's economy as a whole.
RBA Cuts Rate to Record LowMay 07, 2013
The Reserve Bank of Australia (RBA) announced today a 25bps cut to interest rates from 3% to 2.75%. This puts the current rate to the lowest it has been so far since the RBA began setting monetary policy.
While analysts were divided on whether or not there would be a 25bps cut this May, they continue to foresee another 25bps cut later in the year. This would put the interest rate at 2.5%.
Increased Unemployment, Low Inflation
In his statement, RBA Governor Glenn Stevens pointed out that growth in the country has somewhat slowed down during the second half of 2012, a trend that has continued up to the present. Aside from that, the unemployment has also increased a little, “though it remains relatively low.”
Meanwhile, inflation was “a little lower than” expected. Some analysts point this out as the main reason why the Reserve Bank found it fit to cut rates further.
Stevens said in his statement that, “the Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand. At today's meeting the Board decided to use some of that scope. It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.”
While the previous rate cuts have begun to have a positive impact on the economy, this was not the case on the Australian Dollar. “The exchange rate… has been little changed at a historically high level over the past 18 months, which is unusual given the decline in export prices and interest rates during that time.”
The announcement has somewhat created an immediate effect, as the Australian and US Dollar pair fell from 1.025 to around 1.018 after the announcement.