Not a Media Release from the RBA 1 May 2012

Not a Media Release

Number	2012-XX
Date	1 May 2012
Embargo	For Immediate Release

Not a Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to reduce the cash rate by 50 basis points to 3.75 per cent.

For the full article, click on the link below:

http://www.marketeconomics.com.au/1911-not-a-media-release-from-the-rba-1-may-2012

OMG! The market will be spooked if the RBA cuts 50!

There are some financial market analysts seemingly railing against a 50 basis point rate cut from the RBA next week.

Such a move, it is opined, will “spook the market”, “damage the RBA’s reputation”, “frighten the horses” and other such terms.  These might be valid and interesting projections.  But no one that I have seen has articulated what this actually means.

Will a 50 basis point cut lead to a stock market crash?  I would judge that it would boost the stock market.

For the full post, go to:

 

 http://www.marketeconomics.com.au/1909-omg-the-market-will-be-spooked-if-the-rba-cuts-50

RBA Update: A Sub-3.5% cash rate is unlikely

Since about September last year, I have been of the view that the economic and financial market fundamentals would see the RBA cut the cash rate to 3.5% by around the middle of 2012.  I will stick with this view for now.  The issue jumping up at the moment is where to after that for interest rates in the latter part of 2012 and into 2013.

Based on recent data, a case is building that suggests the RBA may need to go below 3.5% over the medium term.  The market is close to pricing in a 3.0% cash rate for early 2013 and clearly, this is where the risks are.

That said, it will take a sharp rise in unemployment and a further drop in inflation for the RBA to move official rates back towards the depths of the GFC levels, which coincidently was 3.0%.

For the full article, click below:

http://www.marketeconomics.com.au/1900-rba-update-a-sub-3-5-cash-rate-is-unlikely 

Deflation on the RBA Menu?

The Statement accompanying the April rates-on-hold decision of the RBA concluded:

• “At today’s meeting, the Board judged the pace of output growth to be somewhat lower than earlier estimated, but also thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.”

So what have the “key data on prices” so keenly sought by the RBA shown since that Statement.

• The consumer price index rose 0.1% in the March quarter (it fell 0.2% seasonally adjusted).

• The RBA underlying measure for the CPI rose 0.3% and annual inflation fell to a 13 year low of 2.1%.

• The producer price index fell 0.3% in the March quarter.

• Export prices fell 7.0% in the March quarter; import prices fell 1.2% in the March quarter.

• The RP Data house price series, up to an including today, has fallen 0.6% so far in April.

For the full article, click here:

http://www.marketeconomics.com.au/1893-deflation-on-the-rba-menu