RBA To Hold Off On Rates?

  The Reserve Bank says the Australian economy as facing near term weakness in & quot;demand and output & quot;Despite that assessment, the bank suggests that it wants time to see how much the 4% of rate cuts and the two fiscal stimulus packages from the Federal Government affect the economy.The minutes of the February board meeting & #160;of the bank suggest the bank might not cut rates for a month or two while it assesses the health of demand and the impact of the already substantial stimulus.That's not to say that another run of bad figures for the next month might see a further cut in rates sooner than the bank wants to cut: the minutes say the bank's assessment of conditions will take into account & quot;the short-term data & quot;.But the bank says the rate cuts and stimulus will only have a small impact on & quot;the near-term outlook for Australia. & quot;There's a suggestion there that we shouldn't look for the rate cut and multi-billion stimulus packages to do much to halt the downward momentum in the economy until later in the year.Indeed the minutes see the bank suggesting that these moves will lay the ground work for possible & quot;stronger demand & quot; later in the year. & quot;Together with the fiscal measures, this meant that a very significant macroeconomic stimulus had been applied to the domestic economy, & quot; the minutes said. & quot;This stimulus would take time to be effective and could be expected to have only a modest effect on the near-term outlook in Australia. & quot;Given the speed at which the global contraction had occurred, short-term prospects were thus still for weakness in demand and output. & quot;Nonetheless, the substantial measures taken would help to cushion the economy from the contractionary forces coming from abroad and, over time, work to establish conditions conducive to stronger demand later in the year. & quot;Assessments of those medium-term prospects, as well as the course of the short-term data, would be important to future policy decisions. & quot;The bank said that the short term outlook for the global economy was & quot;very weak & quot;; despite financial markets looking in better shape than they did at the end of 2008. & quot;To date, the Australian economy had been more resilient than other industrial economies. & #160; & quot;Importantly, Australia's financial system remained in a relatively strong condition. & quot;Among other things, this had allowed the significant monetary policy easing starting in September to flow through to large reductions in many lending rates. & quot;Nonetheless, the headwinds from the global economy were very strong and would continue to have a significant negative effect on the domestic economy in the near term. & quot;Members noted that the package of fiscal measures to be announced by the Government later that day would result in a significant boost to demand during 2009. & quot;Even so, given the contractionary forces coming from abroad and the clear evidence that inflation was on a downward trend again, members judged that another substantial easing of monetary policy at this time was appropriate. & quot;They supported the recommendation for a cut of 100 basis points.Members agreed that, together with earlier rate cuts, this would amount to a very significant easing of monetary policy. & #160; & quot;This had occurred relatively early in the business cycle and lending rates in many cases would soon be at generational lows. & quot;Those low rates bring their own problems and the major banks are running into margin compression as local lending rates fall, but their cost of borrowing (here and offshore) are not falling any more. & #160; & #160;  

Add Your Business

List your business

for more exposure
and more traffic!


Sydney

  [ Change ]
 
Friday

Possible shower.
Today

Min: 12°
Max: 19°
A few showers.
 

Account

Login

To access your account and listings



Remember me
   
   
   
 
 
Find Hunter Valley accommodation online