RBA May Impose Rate Cuts in December
By Erik Pineda | November 20, 2012 5:42 PM EST
A lower cash rate right before the 2012 Christmas season goes into full swing remains a possibility as suggested by the Nov. 6 RBA board meeting minutes, which hinted that 'further easing' could be on the way.
That same meeting opted to keep the nation's benchmark borrowing cost at 3.25 per cent, hitting the brakes on the Reserve Bank's 12-month inclination of shaving off the interest rate, which by this month already shed 125 basis points from the 4.5 per cent seen last year.
The board will reconvene in December and analysts would like to toy with the idea of another rate push back to cap the present year but also hinted to February 2013 as the likely preferred month for RBA's next cash rate reduction.
The chief reason was given by the team headed by RBA governor Glenn Stevens, the minutes of its last discussion, released on Tuesday, read: "The effects of the earlier reductions in the cash rate were continuing to work their way through the economy and members expected that further effects of these changes were yet to be observed.
It is only logical, economists said, for the central bank to allow the perceived benefits of its past intentions to trickle down and take effect considering that latest economic data suggested of a domestic setting that if far from struggling.
As of Q3 2012, Australia is looking at much solid inflation indicators and the nagging financial woes in Europe, effects of which were feared to spill over on key economies, appeared to improving plus the seemingly stabilising development in the United States, both economically and politically.
These factors should make the case for another pause in December or if ever there would be a reduction move on RBA's part, it will not come until the second month of 2013.
But then again, the rate cutback could be imposed a little sooner as the RBA noted on its last meeting that uncertainty seems stubbornly hovering.
According to the Australian Associated Press (AAP), two things seem to bring in some worries for the RBA board: "further moderation in wages growth ... and ongoing growth in labour productivity."
Plus for the RBA, "there was uncertainty about the overall pace of growth of demand (consumption and investment spending) in the economy over the forecast period," as the last board minutes revealed.
It also allowed that "members considered that further easing (in interest rates) might be appropriate in the period ahead."
Yet no definite time frame was laid down because the board appears more bent on an 'extended pause', TD Securities strategist Alvin Pontoh told The Australian on Tuesday.
"Overall, the RBA has appropriately maintained an easing bias but we see no obvious trigger for a December rate cut at this stage," Mr Pontoh added.
While conceding that a slow down was observed earlier this year, the RBA also pointed out that the underlying inflation rate, last listed at 2.5 per cent, was within the target band of two to three per cent.
"With prices data for the September quarter slightly higher than expected and recent information on the world economy slightly more positive, the board judged that the stance of monetary policy was appropriate for the time being," said the central bank.
To contact the editor, e-mail:
Most Popular Slideshows
- Kristen Stewart Moving On With Nicholas Hoult, Jennifer Lawrence Dating Chris Martin – Reports [PHOTOS]
- Kate Middleton Suffocated in Kensington Palace, Queen Elizabeth Reported War With The Duchess [PHOTOS]
- 2014 MTV Video Music Awards: Everything To Know [PHOTOS]
- Chris Martin Dating Reports: Jennifer Lawrence Vs Gwyneth Paltrow [PHOTOS]
Join the Conversation
- Russia Demands Ukraine Release Communications With Doomed Malaysia Airlines MH17, Preliminary Report On Investigations Out This Month
- Ebola Update: Liberian Forces Receive Shoot Orders Against People Trying to Cross from Sierra Leone Border
- Historic First Time: Catholic Pontiff Pope Francis Supports Military Intervention Against ISIS In Iraq
- Chinese Airlines Receives Lawsuit for Rejecting HIV-Positive Passengers
- Travel Alert: Canada Issues Warning Against Chikungunya Disease in Caribbean
- Robin Williams Goodbye Video Hoax: Facebook Users Warned of Celebrity Suicide Exploitation
- 4 Killer Android Features Apple Fans Would Love to Get Come the iPhone 6 Release Date
- ISIS Posts Graphic Beheading Video of US Journalist James Foley
- Nexus 6 Release Date Dilemma with Motorola Shamu Details Pointing to Better Smartphone and Killer Features
- After James Foley, ISIL Threatens to Behead Another American Journalist Steven Sotloff
- Moto X Android 4.4.4 KitKat Update Guide: AT&T/Sprint Release and When to Hit Your Region
- Motorola Moto X+1 On Release Date To Come With Snapdragon 800 Processor, 2 GB RAM, 4K Recording And 5.2-Inch Display