In an unsurprising move overnight, the Reserve Bank of Australia moved to cut the benchmark interest rate by 25 basis points to 2.00%. According to the latest statement by RBA Governor Glenn Stevens, policy measures can be eased further, paving the way for future rate cuts despite assertions that inflation will hit the levels targeted by the central bank. He specifically cited the fall in capital expenditures spending as problematic to outlook as spare capacity coupled with weaker spending hurt growth in the near-term. The major risk to the economy at the moment besides any slowdown in inflation is containing the housing market which has seen prices to continue to rise as monetary accommodation spurs greater borrowing. The Australian dollar spiked higher on the announcement, contrary to the predisposition for rate cuts to see local currency rates fall due to accommodation.
Australia Eases Further
Daily Analysis - 05/05/2015