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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, Commodities

The Reserve Bank of Australia (RBA) kept the Official Cash Rate unchanged after their monthly Board meeting last Tuesday, remaining at the historic low of 2.25%. The RBA was concerned that further cuts to stimulate a weak economy might stoke unsustainable growth in house prices. The RBA Board decided to save its monetary policy stimulus for a later date, as local shares and capital city house prices appeared poised to set new record highs last week. Most economists as well as investors had been expecting the RBA to cut rates by 25 basis points to 2% so the “no change” announcement sent the market into a sell-off, with shares falling and yields rising by as much as 15 basis points.

Despite the sell-off, markets are still factoring in a lower cash rate, with a full rate cut factored in by May, however every RBA Board meeting is now “live” for a possible rate cut.

Source: Rural Bank

 

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