rate cut Posts on Forex Blog
RBA: We will Cut Rates Soon
Aug 13, 2008
In their policy statement released last week, the central bank of Australia all but guaranteed a rate cut before the year ends.
Today, they have made it a guarantee.
In a statement before Australian lawmakers, RBA Deputy Governor stated "We cannot wait to see a fall in inflation before we start cutting rates".
The AUD has been hit hard in recent weeks, falling 13 of the past 14 trading sessions and each of the past 7 days.
Like Europe, Australia has seen a sharp reduction in retail sales. While inflation remains considerably high at 4.4%, an interest rate of 7,.25% leaves them room to cut in an inflationary environment.
Helping the RBA's case, the latest Inflation Expectations report drop considerably from 5.9% to 4.9%.
Futures markets are now pricing in a 50bps rate cut in their Sept 2nd policy meeting.
interest rates, AUD, RBA, rate cut, comments
Kiwi Down Against 16 Majors, Rate Cuts this Fall
Jun 5, 2008
As expected, the RBNZ held rates steady at 8.25%. But,governor Bollard shocked forex traders today with an extremely dovish statement after their scheduled meeting. In his statement Bollard stated the RBNZ was "in a position to lower the OCR later this year". Indeed, New Zealand has been hit with their own slowdown recently. While house prices recently rose 2.7%, sales are down severely across the country. This has prompted the RBNZ to predict a 13% reduction in home values, 22% when inflation is factored in.
Bollard suggested that inflation will hit 4.7% in Q3, as such the bank is unlikely to cut until they see further deterioration. But in a nod to the realities of the slowdown, Bollard suggested GDP expansion would be extremely limited this year with only a modest recovery next year. This sharply contrasts with predictions made earlier this year for strong growth. Should weakness persist, the chances for a September rate cut will certainly pick up.
One shore over, Australia continues to see strong growth. GDP beat expectations by rising to 3.6% annualized - far higher than the 2.8% estimated. And, the trade deficit improved drastically, shrinking from AUS $2.55 billion to AUS $957 million in April. Indeed, with an expected growth of 20% in mining contract terms, and increases to iron ore still unaccounted for, the trade deficit may vanish entirely. Forex traders continue to speculate that Australia may raise rates once again in the next year.
September-October may be a wild period if the US and Australia raise rates while New Zealand cuts.
The Kiwi is down against all 16 majors. The NZDUSD is at 76.67, down more than 2% from yesterday.
GDP, NZD, rate cut, Kiwi, RBNZ
Fed Glum, But Hey, No More Rate Cuts
May 21, 2008
In a mixed bout of pessimism with silver linings, the Fed indicated that growth will be worse than originally forecast, but rates are unlikely to be cut again.
The Fed now believes unemployment will be worse than expected, and that housing is unlikely to recover anytime soon. Overall, the Fed cut annual growth to 0.3% - 1.2% (from 1.3% - 2%).
At the same time, the Fed also joined team Trichet in warning of inflation. They indicated the April 25 bp cut was a "close call". Since September, the Fed has cut rates 325 bp to reach the current 2% level. Futures markets are pricing in a 90% chance the Fed keeps rates at 2% in June.
Tomorrow, will have 3 key US government reports by 10:30am est. Weekly jobless claims will be first at 8:30am, OFHEO home price data at 10am, and finally natural gas at 10:30am.
Read more at CNBC
rate cut, Trichet, rate hike, Fed
