Reserve Bank of Australia’s Cash Rate Sliced by 25 Basis Points

May 6, 2013

Australian monetary officials implemented a seventh interest rate cut in a year and a half but the first since December 2012.  The new Official Cash Rate (OCR) becomes 2.75% versus a pre-November 2011 peak of 4.75%.  Officials released a statement that justifies the latest easing by citing weak credit demand, expectations of in-target inflation for the next 1-2 years, sub-trend economic growth since mid-2012, inflation that’s been a little lower than expected lately and, most importantly, an historically high Australian dollar despite previous rate reductions.

Officials didn’t rule out further interest rate reductions.  “The Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand. At today’s meeting the Board decided to use some of that scope.”  This wording implies that some scope remains for a rate cut if deemed appropriate.

Copyright 2013, Larry Greenberg.  All right reserved.  No secondary distribution without express permission.



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