OFFICIAL INTEREST RATE MOVED FOR THE FIRST TIME IN 18 MONTHS!

In step with other central banks around the world to ease monetary policy, the RBA to cut its cash rate from 2.50% to 2.25%. It now seems that a further cut, in March, is highly likely.


The decline in Australia’s terms of trade, mostly via lower commodity prices, have reduced national income. Further falls are possible and the RBA board determined that a rate cut would assist in supporting domestic demand.


Key to the RBA’s decision appears to be a downgraded assessment on the growth outlook. We will gain insight into the RBA’s growth and inflation forecasts on Friday, when it publishes its quarterly Statement on Monetary Policy.


The RBA remains dissatisfied with the level of the Australian dollar, despite its significant depreciation of late. It maintains that “a lower exchange rate is likely to be needed to achieve balanced growth in the economy.”