RBA Cuts Key Rates

The Reserve Bank of Australia cut its benchmark interest rate by a quarter percentage point to the lowest since 2009 as Europe’s debt crisis and slower Chinese growth overshadowed a stronger domestic labor market.

Governor Glenn Stevens and his board lowered the overnight cash rate target to 3.5 percent, the RBA said in a statement in Sydney today. Thirteen of 27 economists surveyed by Bloomberg News predicted the move, while four forecast a half-point reduction and 10 expected borrowing costs to remain unchanged.

“Europe’s economic and financial prospects have again been clouded by weakening growth, heightened political uncertainty and concerns about fiscal sustainability and the strength of some banks,” Stevens said in the statement. In Asia “the ongoing trend is unclear and could be dampened by slower Chinese growth,” he said.

The local currency and stocks maintained earlier advances after Stevens’s second rate reduction in as many meetings. Australia’s economy is giving mixed signals, with the unemployment rate at a one-year low of 4.9 percent and an investment pipeline worth almost A$500 billion ($489 billion) driving growth in some regions, even as export prices have slumped, building approvals dropped and retail sales weakened.

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell