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Livas1
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"New information will, as always, be important in our monthly assessments of what monetary policy needs to do. As far as prices are concerned, we will get another comprehensive round of data in late July."

 

I'm leaning towards the July data not justifying a rate hike.

 

He's Bluffing!

 

Just warning the market of a rate rise might do the job.

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it is a never-ending dance, for sure

 

...By itself, the higher level of household saving should also give the Reserve Bank opportunity to avoid, or delay, raising interest rates. Alas, the national accounts on the economy that point out the increase in thrift also show an acceleration in wages and a decline in national productivity. Even with the uplift in saving, the Reserve Bank will need to consider another rate increase.

http://www.theaustralian.com.au/business/o...6-1226074373992

 

and the inflation numbers themselves, with guidance from the "comprehensive pricing data"

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  • 4 months later...
  • 5 months later...

Ok, so the RBA knocks off 50 basis points to the cash rate.

1 cent taken from the AUD/USD cross.

If all the "experts" are right, and the RBA takes it down to 3.75 (or lower?) what impact will this have on OZ?

The Nab are still offering 5.5% deposit rates for 5 years, 5.15 for 2 years.

Obviously they don't expect much change in the long term.

Those investors still largely in cash may not necessarily rush back into the sharemarket,

unless the banks start dropping their deposit rates. The headline RBA interest rate

is in some ways a bit of a furphy. The banks don't slavishly follow it.

However, if overseas depositors think things are going sour here, they will pull out their money.

This has implications for the AUD as well as the cost of funds for the banks.

It also has implications for the Inflationary aspect.

If the dollar falls much more, the imported deflation we experienced

will be replaced by imported inflation.

Interesting times.

Mick

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The NAB is the first to respond.

We have been told that the banks face problems because of the cost of funds. So what do they do??

They don't pass on the full 50 basis points to its borrowers, but their Isaver rate is cut by the full 50 basis points.

So much for their cost of funds increasing.

Is this hypocrisy or what??

Some interesting points in the press release.

The RBA said part of the move was to counter banks' recent rate increases, and the remainder was to stimulate the economy.

Glen Stevens said

"that the size of the cut was necessary to ensure banks cut their rates to below the levels of December last year."

Why is that important- was that a watershed month? Love to know what the thinking was behind it.

 

Mick

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  • 1 month later...

in a few minutes, we'll know whether the pundits were right with their guesses of another .25% reduction.

Stand by for the breaking News...

 

post-20537-1338870687_thumb.jpg

(ed 2:31)

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Is this the relief rally?

 

post-20537-1338872187_thumb.jpg

 

The Ossie seems to take it all in his stride: nothing unexpected, factored-in, and a bit of a non-event maybe:

 

post-20537-1338872361_thumb.jpg

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Macquarie view: We would view this decision as a precautionary measure aimed at shoring up confidence, rather than a reaction to soft domestic economic conditions. In our view, the RBA is unlikely to continue cutting rates simply as a precautionary measure against the risk of something bad occurring.

Impact

- The RBA's focus on the "weaker and more uncertain international environment", while altering very little of its underlying commentary on the Australian economy, suggests that its decision should be seen as a precautionary measure aimed at shoring up confidence, rather than a reaction to soft domestic economic conditions.

 

- And in our view, the RBA is unlikely to continue cutting rates simply as a precautionary measure against the risk of something bad occurring. Hence this could point to a period of stable rates in the next few months, contrary to current market expectations.

 

Outlook

- The RBA highlighted that "modest domestic growth and a weaker and more uncertain international environment" were the key factors in its decision.

 

- To take each of these two factors in turn, it is worth noting that the RBA appears to have not changed its view on the domestic economy, with the accompanying statement reading similar to previous assessments - divergent outcomes between sectors, with a still high terms of trade and a firm labour market combined with soft business and consumer confidence and weak credit growth. That is, there do not appear to have been any major developments in the past month that have changed the RBA's view of the domestic economy and would justify a move in the policy rate.

 

- But what has changed, clearly, is the international environment. And the RBA highlights "further weakening in Europe and some further moderation in growth in China", combined with a deterioration in financial market sentiment over the past month. Yet interestingly, the RBA also focuses on these risks as a "potential source of adverse shocks". That is, the RBA has chosen to lower rates now on the risk that these events materialise, and in order to shore up confidence, rather than wait for them to unfold.

 

- The question, therefore, is where to from here? In our view, should the worst case scenarios around a hard landing in China or a significant default event in Europe occur, the RBA will clearly be ready to lower rates again. But the RBA is unlikely to continue cutting rates simply as a precautionary measure against the risk of something bad occurring. This could point to a period of stable rates in the next few months.

 

- Indeed, there was an interesting change in the RBA's language around inflation this month ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ essentially shifting from noting that low inflation was 'affording' room to lower the policy rate, to having 'afforded' the room. That is, the RBA may well be comfortable with the current policy setting given its outlook for the domestic economy. That said, we do expect the RBA to cut rates later in 2012 as the domestic economy flags later in the year.

 

Further reinforced by the 1.3% GDP number for the last Q just out

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