Pressure is mounting on Australia’s central bank to join developed-market peers in easing monetary policy as falling oil prices and stagnant economies spread disinflation.
The Reserve Bank of New Zealand abandoned a tightening bias today and warned of negative annual headline inflation, a day after Singapore’s unscheduled easing. Those moves followed Canada and India unexpectedly cutting borrowing costs and Europe announcing quantitative easing.
“The key driver for these central banks is increasing downside risks to global inflation and growth,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. “Canada talked about an insurance cut and pointed at energy, you substitute that in Australia for iron ore and dairy in New Zealand. It’s no coincidence that the commodity nations’ central banks are shifting rapidly in policy assessments.”