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RBA cut rates to 2.75, lowest since records began in 1959

FXstreet.com (Barcelona) - The RBA just cut the cash rate to 2.75% or to the lowest level on record, with figure dating back to 1959. The central bank said the cut needs to encourage sustainable growth.

Only 8 out of 29 economists polled by Blommberg got the decision right this time around. As Greg McKenna, CEO at GlobalFX, notes: "Good move #RBA 25 bps cut noting low inflation and a high AUD."

The RBA added that it had decided to use some of its scope' to ease further, suggesting that more cuts may come.

From the RBA: "The Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand. At today's meeting the Board decided to use some of that scope. It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target."

On the exchange rate, the RBA said: "exchange rate strength remains unusual", which according to David Scutt, Treasury Dealer at Arab Bank Australia, "is much better tone from the Board."

The RBA stated: "The exchange rate, on the other hand, has been little changed at a historically high level over the past 18 months, which is unusual given the decline in export prices and interest rates during that time. Moreover, the demand for credit remains, at this point, relatively subdued."

Australia RBA Interest Rate Decision falls to 2.75% in May 7 from 3%

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Forex: Aussie plummets on RBA Interest Rate Decision

The AUD/USD is currently trading sharply lower, down 65 pips at 1.0188. Initially the pair was trading near the 1.0240 level, but plummeted as the RBA announced an interest rate cut by 0.25% which will take the current cash rate from 3.00% to 2.75%.

According to Sean Lee at FXWW, The rate cut has pushed the AUD/USD back below 1.0200 and I’d expect any rallies to be capped by 1.0230. I’m hearing the initial batch of professional bids are at 1.0165/70."

The FXStreet.com Trend Index now reads slightly bearish on the 1 hour time frame. Initial support can be found at 1.0170 (support on weekly chart), followed by 1.0115 (weekly low from March 4th, 2013). Initial resistance is now located at 1.0220 (previous support, now resistance on daily chart), followed by 1.0244 (the 9dma on 1 hour chart).
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