Citi says RBA seems to be losing faith that cutting rates can help any more, but will cut in May anyway

Author: Eamonn Sheridan | Category: Central Banks

In Citi comments on the RBA Minutes, the begin by summarising the document:

  • Advantages in receiving more data
  • Said the economy continued to grow below trend
  • Recent declines in commodity prices
  • There could be a larger than expected fall in mining investment
  • Non-mining business investment could remain subdued for longer
  • Indicators showing modest employment growth ahead


  • The RBA seems to be losing faith in the effectiveness of cutting rates further to support demand
  • Is worried about financial stability risks

But, regardless, Citi's view is that there woill be 25 basis point rate cut in May

  • They say new forecasts in the May policy statement will provide the rationale


It seems contradictory to me that Citi see the RBA as thinking further rate cuts as being not effective, but will cut anyway. Maybe the RBA will cut 'cause there is little else they can do?

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