Australia: RBA cuts rates to historic low
August 6, 2013
The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points to 2.50% at its 6 August meeting, a decision broadly expected by the market. The move - which set the rate at a historic low - came after two meetings in which the RBA remained on hold, following a rate cut of 25 basis points in May.
As inflation remains in check, the RBA adopted a more accommodative stance to boost growth. The RBA sees below average global economic activity this year, but expects a pick up next year. Output is running below trend and the RBA indicated that output is expected to remain sluggish in the near term, "as the economy adjusts to lower levels of mining investment." Meanwhile, inflation remains in line with the Bank's target and is expected to remain so, "over the next one or two years," as moderation in labor costs is expected to outweigh the inflationary impact of the Australian dollar's (AUD) recent depreciation.
FocusEconomics Consensus Forecast panellists expect the cash rate to end 2013 at 2.92% and to rise to 3.38% by the end of 2014.
Author: Armando Ciccarelli, Head of Data Solutions