The Australian Central Bank announced a cut in interest rates on the 4th, with cash rates cut to 125 percent. (figure / Australian Network)
Australian Central Bank (RBA) met expectations and announced at its monthly interest rate meeting on the 4th that Australia`s cash rate would be cut by 25 basis points to a record low of 125 percent. At the same time, it is also the first interest rate cut in nearly three years. Although ANZ Bank (ANZ) was the first to announce a cut in variable house lending rates in response, it was attacked by the Australian Finance Minister for cutting interest rates less than the rate cut.
End of maximum prudent monetary policy
The rate cut announced on the 4th was the first change in cash interest rates announced by the RBA since August 2016, the Australian wide Web reported. The decision also marks the end of Australia`s longest prudent monetary policy.
The RBA`s decision was in line with market expectations. All 43 economics families interviewed by Refinitiv (former Thomson Reuters) had predicted that the RBA would cut interest rates in June, while another 80 percent of economics respondents predicted that the RBA would follow up in August.
It is understood that due to Australian retail sales data released on the 4th that Australian consumers are cutting spending, the RBA is under greater pressure to stimulate the crumbling Australian economic.
In addition, as market participants become more confident that the Fed is expected to cut interest rates later this year, coupled with a series of rate cuts in neighboring countries, they are also putting pressure on the RBA to cut interest rates.
In response, Lauris (Tim Lawless), head of research at CoreLogic, an Australian real estate research firm, said that although it met market expectations, Australia`s cash interest rate had dealt with record low levels. This rate cut stimulus is unlikely to have the same effect as in the past.
The economic data will continue to be followed closely.
The RBA board made the decision to support job growth while strengthening confidence that inflation will meet medium-term targets. "the main uncertainty in Australia remains the outlook for household consumption, which is affected by long-term low pay growth and falling house prices," Raui (Philip Lowe), governor of the Bank of Australia, said in a statement.
Although there is no commitment to follow-up, but the analysis believes that the Raui statement does not have the outside change view that the RBA interest rate cut is not yet over.
"the board will continue to closely monitor the development of the labour market and adjust monetary policy to support sustainable economic growth and meet inflation expectations in the future," Lowe concluded.
There is no room for banks to cut interest rates
It is worth noting that ANZ is the first main Australian bank to respond to the central bank`s interest rate cut.
"our decision is based on a number of factors, such as business performance, market environment and impact on our users, including savings users. Hande (Mark Hand), head of Australian retail and commercial banking at ANZ Bank, said.
However, ANZ`s decision did not satisfy (Josh Frydenberg), Australia`s finance minister. ANZ announced a cut in interest rates by only 70% of the cut in cash rates. However, Fledenberg called on banks to pass on all the benefits of interest rate cuts.
"I think ANZ`s move disappoints its users. It`s very disappointing," Fledenberg said. "it`s not just government`s expectation, but actually the public`s expectation, to pass on the benefits of interest rate cuts completely."
It is understood that the Federal Bank of Australia (CBA) and other small lending institutions, including RACQ and Reduce Home Loans, have announced that the reduction in lending rates will be the same as the rate cut.
