RBA hoses down rate cut speculation: ANZ

RBA hoses down rate cut speculation: ANZ
Jennifer DukeDecember 7, 2020

Reserve Bank (RBA) governor Glenn Stevens has “hosed down speculation” of a rate cut, according to an ANZ research analysis of his latest media comments.

Stevens told The AFR that the problem with the economy is a lack of "animal spirits", rather than an issue with the price of money, and emphasized the importance of providing a steady and predictable monetary policy.

He pointed to the swinging expectation of economists and experts as to where rates would move to and when.

"We have had, a few times over the period of stability that we have already had, at various times some commentators saying they still think rates might go down a bit. That swung to “They will go up”. It swung around a few times," Stevens said.

ANZ research’s latest bulletin notes that Stevens’ comments have reinforced their view that the "RBA clearly would prefer a substantially lower exchange rate to lower interest rates, and while it hasn’t closed off the possibility of a rate cut, at the moment it seems less than convinced that a lower cash rate would assist the recovery".

They pointed specifically to his comments that a cut in the cash rate “has to remain an open question” and that if the RBA believes it will assist confidence then it may be on the table for consideration in 2015.

Stevens noted that the position of the RBA is to foster confidence by giving people the sense that they can plan ahead. While he noted that not everything is predictable, their aim is to make it as stable as possible.

"If you think that confidence is the thing that is kind of the missing ingredient, then what can we do for confidence? The answer that I came up with is we could be steady and predictable and be clear about that. So that’s what we have sought to do," he said.

The main factor ANZ research is watching will be the Australian dollar.

Jennifer Duke

Jennifer Duke was a property writer at Property Observer

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