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RBA Still Willing to Cut Interest Rates Further

RBA Still Willing to Cut Interest Rates Further
May 08, 2015 By Matthew Dibb

The Reserve Bank of Australia will not rule out an additional rate cut in the future, it said in its quarterly Statement on Monetary Policy released on Friday. Earlier in the week, the RBA decided to cut the cash rate 25 basis points to 2.0 per cent, citing commodity prices and a potential Fed interest rate hike as contributors to the decision. In its announcement on Friday, the board members said the central bank would continue to monitor economic conditions to evaluate the need for an additional rate cut.

The central bank said it had a particular focus on slowing Chinese growth and weak business investment in Australia. “The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time,” it said. “In China, economic growth in 2015 is projected to be a little weaker than previously forecast, reflecting slower-than-expected growth across a rage of activity indicators in the March quarter.”

In February, the central bank said the economic outlook was worse off than previously projected. The RBA’s projections for economic growth in the year to June 2016 was lowered by 25 basis points to the range of 2.5 to 3.5 per cent. In Friday’s announcement, the board members revised the outlook even further. "GDP growth is forecast to remain below trend for a bit longer than had been anticipated in the February statement," the RBA said. Despite the headwinds for the Australian economy, the RBA has noted that labour force data was “a bit better” than previously indicated.

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Matthew Dibb Author: Matthew Dibb May 08, 2015

Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.

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