-Reserve Bank of Australia
A deteriorating economic outlook, doubts about a pickup in domestic spending and weak China's demand for raw materials triggered the latest interest rate cut. The minutes of the RBA's February gathering revealed that the board decided to cut rates to a new historic low of 2.25% after the data showed the Australian economy struggled more than previously expected. Also, the central bank remained concerned over the ongoing strength in the housing market, and signalled that it would keep a close eye on developments in the market, as well as the effect of moves late last year, which were aimed at tempering investor activity. The minutes also showed the RBA's view of the Australian Dollar, which, according to the central bank, was still above most estimates of its fundamental value. The Aussie Dollar has dropped a long way against the US namesake, but not so versus other major currencies.
ANZ, Commonwealth Bank and UBS expect another rate cut in March, particularly after the last data showed the nation's unemployment rate unexpectedly jumped to 6.4%. In the RBA's Statement on Monetary Policy, released days after the cash-rate decision, the bank revised downwards its GDP growth and inflation outlook to reflect the effect of Australia's declining terms of trade and the precipitous falls in oil prices since June. The bank now predicts that the jobless rate will rise higher.
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