seems 50 basis point is the way to go for
RBA at the April meeting.
In today RBA statement following last week meeting the central bank see scope of further cut in the CB overnight cash rate.
From bloomberg
RBA at the April meeting.
In today RBA statement following last week meeting the central bank see scope of further cut in the CB overnight cash rate.
From bloomberg
so 54% are for 50 bp, I am with that and we'll just get ahead of NZ againMarch 17 (Bloomberg) -- Australia’s central bank policy makers said they have scope to cut interest rates further after pausing this month to assess the impact of record reductions in benchmark borrowing costs and increased government spending.
Reserve Bank of Australia board members saw “reasonable cases” for both pausing to evaluate the economy and cutting the overnight cash rate target from a 45-year low of 3.25 percent, according to minutes of their March 3 meeting, released in Sydney today.
Governor Glenn Stevens and his board left the benchmark rate unchanged for the first time in seven months amid signs the “monetary and fiscal stimulus that had been applied to the economy was having an expansionary effect,” the minutes said. Still, the size of this boost “remained unclear” and was likely to take time to become evident.
“It was clear that March was a line-ball call,” said Su- Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. “Given the closeness of that decision, there remains scope for rates to go a little lower,” probably to 2.5 percent, she added.
The Australian dollar traded at 66.06 U.S. cents at 12:07 p.m. in Sydney from 65.91 cents just before the minutes were released. The two-year government bond yield fell 3 basis points to 2.73 percent. A basis point is 0.01 percentage point.
The decision to leave the cash rate unchanged this month “would leave adequate flexibility for policy at future meetings,” today’s minutes said.
Global Rates
Traders forecast a 54 percent chance of a half a percentage point reduction in the central bank’s overnight cash rate target when policy makers meet next on April 7, a Credit Suisse Index based on swaps trading showed at 12:05 p.m. in Sydney.
Australia’s benchmark rate is higher than most major central banks. The U.S. Federal Reserve’s rate is close to zero, the Bank of England’s 0.5 rate is the lowest since its creation in 1694, and the European Central Bank trimmed its rate this month by half a percentage point to 1.5 percent.
The four percentage points of reductions in Australia’s benchmark rate between September and February, as well as the government’s decision in February to spend A$42 billion ($28 billion) on handouts and infrastructure, preceded official figures on the “extent of economic weakness,” the minutes said.
A report published one day after the bank’s March meeting showed the economy unexpectedly shrank 0.5 percent in the fourth quarter, the first contraction in eight years. The Reserve Bank had expected a “small fall” in growth.
‘Best Course’
A drop of 0.5 percent “wasn’t small,” said RBC’s Ong. “The starting point for the economy is slightly worse than they thought.”
Only four of 18 economists surveyed by Bloomberg forecast the bank’s March 3 decision. The rest tipped at least a quarter- point cut.
The board members “judged that having made a major change to monetary policy over the preceding several meetings in anticipation of weak economic conditions, the best course for this meeting was to leave the cash rate unchanged,” today’s statement said.
The nation’s financial system “remained strong” and cuts in official borrowing costs were resulting in lower mortgage rates for households, they said.
Banks have passed on more than 375 of the 400 basis points policy makers cut from the benchmark rate since September, saving borrowers with an average A$250,000 mortgage about A$600 a month. Today’s minutes said households are also benefiting from lower gasoline costs and government handouts.
Recession Threat
Still, while Australia’s economy had so far “remained stronger than many other economies, the speed and scale of the global economic deterioration and its effect on confidence meant that in the near term, domestic activity would be avoidably weak,” the Reserve Bank said.
Reports published in the past two weeks have added to speculation the nation’s economy may be in its first recession since 1991.
The jobless rate rose in February to 5.2 percent, the highest in four years, as companies such as clothing manufacturer Pacific Brands Ltd. and miner BHP Billiton Ltd. fired the largest number of full-time workers in almost two decades.
Business confidence held near a record low in February and an index of consumer sentiment showed pessimists outnumbered optimists this month for a 13th month.
To contact the reporter for this story: Jacob Greber in Sydney at [email protected]
Last Updated: March 16, 2009 21:26 EDT