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Australia C Bank Surprises Markets With 50 Bps Cut, Aussie Tumbles

May 01 2012
By
Forexbrokerz.com

News

  • Australian C bank cut base rates by 50 bps in a surprise decision leaving most of the market participant in surprised state as not many expected the C bank to take such a dovish view of economic conditions
  • Bank said that cut was necessary to deliver appropriate rate of borrowing (Most of the mortage lenders have de marked their lending rates form RBA base rates in Australia)
  • It also said that Inflation will be lower than forecasted earlier but within RBA's target range (2-3 pct) for next 2 years
  • It also said that Housing market in Australia remains subdued
  • On global economic condition it said that US is growing at moderate pace while China has slowed down a expected, however it termed European conditions as very difficult

Quotes

   "I think they have done the right thing. The economy is coming far weaker and inflation pressures have substantially receded. A 25 point (cut) would be meaningless, whereas a 50 basis point move will lead to decent reduction in borrowing costs." 

   "The economy is not certainly going to recover just because of the 50 point cut. I think it probably needs a couple more cuts going forward. I don't agree whether it may go in June. We might have to sit back to see the reaction to today's move. But I think it's likely we will see another one or two moves, probably going back with a 25 basis point pattern rather than 50. We will probably see cash rates down to 3.25 by the year end." 

-Shane Oliver, Chief Economist, AMP Capital Investors     

   "I think we are all surprised. I think it suggests that the RBA is pretty worried about where growth is headed and some aggressive monetary support was needed. 

   "There was uncertainty about what the commercial banks would do and whether they would pass on the full amount and that influenced the decision (to cut by 50 bps). 

   "I think the bias is towards more rate cuts. With the low inflation outlook it gives them scope to cut rates further."   

-Matthew Circosta, Economist, Moody's Economy.Com      

The material has been provided by Instaforex Company - instaforex.com
TAGS: Australia  C  Bank  Surprises  Markets  With  50  Bps  Cut    Aussie  Tumbles 

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