From bloomberg
http://www.bloomberg.com/apps/news?pid=20601068&sid=aKBUL5drPymY&refer=economy
Cheers
Shane
http://www.bloomberg.com/apps/news?pid=20601068&sid=aKBUL5drPymY&refer=economy
Cheers
Shane
RBA to drop rates by 0.5% next meeting
- Thread starter plusnq
- Start date
Why? 
Don't ya' want a couple more first?
Don't ya' want a couple more first?
be careful on what you wish for.
CBA won't commit to following the cuts down.....as ANZ won't......why? well they say because there's turbulent waters at the moment.
what they mean is they are more reliant on foreign wholesale funds more than ever before and will remain that way, they have exposure to foreign investments that are at high risk of being bad, they have already taken losses on sub prime exposure. ergo, they need to increase profit margin to cover those losses.
NAB is worse.
will be interesting to see what the banks do. spin off the trouble in the US to not pass the cuts, and increase margin..... or pass the cuts to improve confidence.
what they mean is they are more reliant on foreign wholesale funds more than ever before and will remain that way, they have exposure to foreign investments that are at high risk of being bad, they have already taken losses on sub prime exposure. ergo, they need to increase profit margin to cover those losses.
NAB is worse.
will be interesting to see what the banks do. spin off the trouble in the US to not pass the cuts, and increase margin..... or pass the cuts to improve confidence.
It's not the ideal situation, but if the RBA thinks laterally (and not only literally) about what it is they are charged with, then a cut of some magnitude is easily justified.
From the RBA site:
It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank ... are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
(a) the stability of the currency of Australia;
(b) the maintenance of full employment in Australia; and
(c) the economic prosperity and welfare of the people of Australia."
Since 1993, these objectives have found practical expression in a target for consumer price inflation, of 2-3 per cent per annum. Monetary policy aims to achieve this over the medium term and, subject to that, to encourage strong and sustainable growth in the economy. Controlling inflation preserves the value of money. In the long run, this is the principal way in which monetary policy can help to form a sound basis for long-term growth in the economy. [my emphasis]
The CPI target was used as justification for judicious tightening during that phase of the cycle, and while it is still, at 4.5%, above their desired band, the mandate they have (repeated verbatim above) does specify that 2-3% is a medium term target (not an absolute) and that they aim to "encourage strong and sustainable growth into the economy".
We're likely already headed for recession. Keeping interest rates that fraction too high isn't going to help.
Swan just announced he is going to inject 4 billion into propping up the non bank lenders.
Does anyone want to work out what interest rate decrease that is equivalent to?
Does anyone want to work out what interest rate decrease that is equivalent to?
What does this say about the state our lenders are in?? I notice Swan made the announcement after the stock market closed on Friday. Will be interesting to see the impact of this announcement on financials on Monday.
What do you think WW??
Regards Jason.
yup - if they do 50bp it'll be so banks can hold 25bp for profit and pass 25bp onto customers.
my money is on 25bp, but i still think it may be Nov, not Oct, that they drop.
however a lot of people i speak to are expecting a drop in Oct.
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