03 Feb RBA drops rates to a record low!
RBA drop rates to a Record Low!
The RBA has embedded a historical reduction in the cash rate from 2.5% to 2.25% today. The announcement has caught the market out of step with the AUD falling from US78.10 to below US76.70 within moments of the announcement.
Global economic forces have provided the pathway to succumb to this announcement with a dozen central banks around the globe cutting their rates since New Year which has placed concerns around the capacity of our AUD to fall further.
Deflationary pressures from falling commodity prices have created “an income recession” destroying federal revenue and playing havoc with our budget (deficit) in parallel to domestic demand growth being sluggish.
Keep an eye on the yield curve. Australian 10 year bonds yields are now trading below the previous cash rate of 2.5% and have fallen 1.55% over the past 12 months. The trend is bullish and intact.
PLEASE CLICK ON THE DOWNLOAD BUTTON BELOW TO VIEW THE GRAPH OF THE RBA CASH RATE FOR THE PAST 15 YEARS…NOTICE THE TREND!
Also keep an eye on short term money market sentiment (30 – 180 day BBSY). How quickly will the market build in the next 25 basis point drop in the cash rate?
This is good news for borrowers….