RBA Surprises Market with 100bps Cut
10/07/08
In a surprise move today, the Reserve Bank of Australia (RBA) decided to cut rates by 100bps to 6.00%, the largest cut since May 1992. The RBA cited “conditions in international financial markets took a significant turn for the worse” and that this is “affecting Australia”. While they anticipate inflation to moderate in 2009, the RBA assessed that the economic outlook had substantially changed and thereby required a “significantly less restrictive stance of monetary policy.” The surprise rate cut actually led the Australian Dollar to strengthen and has heightened expectations that other central banks may follow suit.