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15 May 2015
Australian rates might fall to 1.5% - Capital Economics
FXStreet (Barcelona) - Paul Dales, Chief Australia & New Zealand Economist, notes that the Australian budget lends support to the view that RBA might cut rates further to 1.5%.
Key Quotes
“The Reserve Bank of Australia and the Treasurer appear to be playing tennis with the economy. RBA Governor Stevens has already cut interest rates to 2.0% and hinted that he would like fiscal policy to provide more help. In last week’s Budget, Treasurer Hockey ignored this plea and left the economy facing a large fiscal squeeze. The ball is now back in the RBA’s court. Although we don’t expect any immediate action, the Budget lends some support to our view that rates may yet fall to 1.5%.”
“The minutes of the RBA’s May policy meeting, which will be released on Tuesday, are unlikely to hint that further interest rate cuts are in the pipeline. That said, it wasn’t until the month after it cut rates in February that the Bank suggested that another cut might be needed. As such, we would warn against reading too much into what might appear to be a relatively hawkish release.”
Key Quotes
“The Reserve Bank of Australia and the Treasurer appear to be playing tennis with the economy. RBA Governor Stevens has already cut interest rates to 2.0% and hinted that he would like fiscal policy to provide more help. In last week’s Budget, Treasurer Hockey ignored this plea and left the economy facing a large fiscal squeeze. The ball is now back in the RBA’s court. Although we don’t expect any immediate action, the Budget lends some support to our view that rates may yet fall to 1.5%.”
“The minutes of the RBA’s May policy meeting, which will be released on Tuesday, are unlikely to hint that further interest rate cuts are in the pipeline. That said, it wasn’t until the month after it cut rates in February that the Bank suggested that another cut might be needed. As such, we would warn against reading too much into what might appear to be a relatively hawkish release.”