The Reserve Bank of Australia has announced a cash rate cut by 25 bps
- From 2.5% to 2.25% now
- Record low
More to come on the accompanying statement from Glenn Stevens, governor of the RBA
- RBA says cut expected to support demand
- Says growth continuing at below trend pace
- Says domestic demand growth overall quite weak
- Says cut to help foster growth and inflation outcome consistent with target
- Fall in terms of trade reducing income growth
- Says AUD still above most estimates of fundamental value
- Says output growth will remain below trend for somewhat longer
- Says further fall in AUD likely to be needed to balance economy
- Sees unemployment rate peaking a little higher than earlier expected
- Says working with other regulators to assess risks in housing market
- Sees inflation consistent with target over next 1-2 years
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A surprise cut, most surveyed had expected a hold this month.
Rates markets had priced a cut with around a 60% probability, so a close call there too
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AUD/USD is below 0.7700. It stalled just below there for a few moments but lower now. 0.7680 as I update.
The RBA indicating in its statement that this may not be a one and done cut, could be more on the horizon.
The bank is mindful of the risk of further property price gains in the wake of this cut, making particular note that it is working with other regulators re the risks in the housing market.
The task now facing the RBA is to ‘sell’ this a positive development despite what could well appear to be a panic move.
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Adam posted his thoughts on the RBA here: Plenty of jawboning, little guidance in RBA statement
and the full text of the governor’s statement, here:Full text of the RBA statement February 3, 2015:
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Further update
- ASX (local stock market) – to its highest in 7 years now
- AUD/USD down to a 6-year low (0.7665 as I update)
