If China’s scenario worsens and if the economy risks sees a hard landing, the Reserve Bank of Australia might reduce the key rate again, according to Commerzbank.
Advertisement
The majority of economists had forecast that the RBA, an inflation-targeting central bank, would cut interest rates, with 20 out of 25 surveyed by Bloomberg News predicting the move.
Addressing media in Canberra, he said the banks should pass on the rate cut in full or explain the decision “fully and comprehensively” to their customers.
Last Wednesday, the Australian Bureau of Statistics said consumer prices rose only 1.0 per cent over the year to the June quarter, as slow as this measure of inflation has been since 1998.
Neighbouring New Zealand is already stuck in that trap, with inflation at just 0.4 per cent and its central bank under intense pressure to cut rates at a policy meeting next week.
“The board judged prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy”.
The Commonwealth Bank of Australia passed on 13 basis points, Westpac made a 14-basis-point cut for some of its home loan customers and NAB passed on 10 basis points across its mortgage book. “Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments”, Mr. Stevens said.
Although the prices of commodities have rebounded slightly in recent times, they continue to be quite lower than the levels seen in 2014.
The introduction of new lending restrictions – was expected to generate a short pause on housing market growth and would buy the Reserve Bank a window of about six months to cut rates and focus on the inflation side of the equation, Tuffley said.
Despite the rate cut with an interest rate at 1.5%, it is still higher compared to other major central banks, which have introduced negative deposit rates or are maintaining zero interest rate policies.
“Recent data suggest that overall growth is continuing at a moderate pace, despite a very large decline in business investment”, RBA governor Glenn Stevens said in the statement.
Advertisement
“Given very subdued growth in labour costs and very low-priced pressures elsewhere in the world, this is expected to remain the case for some time”, said RBA governor Glenn Stevens.
