March 2009 RBA Rate Decision:
| The Australian central bank held the cash rate steady at the 45-year low of 3.25% amid expectations for a 25bp cut, which suggests that the RBA may keep rates on hold after taking unprecedented steps to stimulate the $1T economy. RBA Governor Stevens said that the extraordinary measures taken on by the government and the central bank will provide ‘significant support’ to the economy, but went onto say that ‘weak conditions are likely to continue in the near term’ as nation teeters on the brink of a recession. Despite the encouraging comments from the central head, the outlook for growth and inflation remains bleak as the downturn in the global economy intensifies, and conditions are likely to get worse as trade conditions falter. Nevertheless, as policymakers adopt a wait-and-see approach, weakening fundamentals could spark another round of easing as growth prospects deteriorate at a rapid pace. |
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