Gloomy Aussie Rates Traders Win as Inflation Forces RBA Rethink
- Economist median estimate is for cut to 1.5% at August meeting
- Forecast changes show central bank willing to do more: CBA
A man enters the Reserve Bank of Australia headquarters in Sydney, Australia, on Monday, Feb. 29, 2016. Australian wage rises are the smallest on record, jobs growth has evaporated and firms plan to cut investment. Add a stronger currency and global calls for stimulus and pressure is clearly building for interest-rate cuts.
Photographer: Bloomberg/Bloomberg via Getty ImagesAustralian policy makers and economists are finally seeing the domestic economy through the dismal lens interest-rate traders have been using for the past year.
Swaps have been indicating for that long that the Reserve Bank of Australia would cut its benchmark rate at least once if not twice over 12 months, even as most economists saw the central bank sitting at a record-low 2 percent. Traders were proved right May 3 when Governor Glenn Stevens cut the policy rate to 1.75 percent. Now, markets and the majority of economists agree that a move to 1.5 percent is likely with JPMorgan Chase & Co., Commonwealth Bank of Australia and Morgan Stanley more bearish still.