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RBA eases monetary policy? « Previous | |Next »
September 1, 2008

It looks as if the Reserve Bank of Australia will ease monetary policy by starting to reduce interest rates as the global economy takes a downturn. Economists in the financial market (most are ex-Treaasury or ex RBA economists) are saying that this will likely be one of several cuts to boost a slowing economy.

Dysoneconomics.jpg Dyson

Business is saying its confidence is shattered; that the economy is fragile;the brakes have been on for too long, there is too much uncertainty and that they need some relief quick fast. Poor business.Unlike the Reserve Bank they have a very clear idea where the economy is going. Not for them the image of driving an unfamiliar care with dim headlights on a foggy night unsure where the next bend is or what direction the road takes.

Update: 2 September
So the RBA has started the reduction of interest rates even though the rate of inflation remains high. People clapped and cheered, then sighed with relief. It is 'ease the squeeze' time. About time too. Lots more are needed. The market factored in another three cuts.

However, the central bank gave no hint that it would follow up yesterday's cut with another, stressing the importance of bringing inflation back under control rather than keeping the economy growing. Notably absent from yesterday's statement was any echo of its assertion a month earlier to "make adjustments as required in order to promote sustainable growth". Instead the bank spoke about the need to "set monetary policy as needed to bring inflation back to the 2-3 per cent target".

| Posted by Gary Sauer-Thompson at 6:27 AM | | Comments (2)
Comments

Comments

The scare has been good for people. Made them disciplined and take steps to reduce household debt.

The banks are playing ball.