RBA Slashes rates to 0.1%

by Nov 3, 2020Market Reviews

RBA Slashes rates to 0.1%

As predicted by many analysts, the Reserve Bank of Australia has slashed rates from 0.25% to 0.1%, a 15-point cut. Furthermore, they’ve decided to buy back over $100 Billion government bonds of maturities around 5 to 10 years over the next six months.

Interest Rates Slashed to 0.1%

 

AUD/USD down 0.44% on the news

The Australian Dollar again, the U.S dollar was down slightly at 0.44%. The ASX 200 was up around 1.88% on the announcement.

Reserve Bank of Australia less dovish on the future of the Economy

The Bank stated they believe that the “economic recovery is underway and positive GDP growth is not expected in the September quarter” despite the restrictions in Victoria. They predict that GDP growth will be around 6% over the year to June 2021.
They believe that the employment rate is expected to be high – however, it may peak at around 8%, rather than the 10% expected previously. The RBA stated that they are “committed to doing what it can to support the creation of jobs.”

This is the third time this year that interest rate has been cut. From 0.75% – 0.5%, 0.5% to 0.25% and now 0.25 to 0.1%.

Treasurer Josh Frydenberg stated that many families would benefit from the rate cut may be able to and lift the country out of a recession. He references someone with a $400,000 mortgage that may save around $1,000 a year from the 0.75% – 0.1% basis point cut. With that said, interest rates are relatively low, so the benefits may be negligible to many, considering the potential further costs of re-mortgaging.

Low rates may be welcome for the housing market of Australia 

Demand for housing may increase on the rate cut, possibly helping the Australian economy boost out of the current recession caused by the Coronavirus. However, some analysts predict that the RBA’s cut will not increase demand as rates are at rock bottom. ANZ” s Banking Group Ltd CEO Shayne Elliot stated that “If homeowners don’t want a mortgage at 2.5%, it’s not clear to me they’ll want one at 2.4%.”

With the lockdown forcing many Australian Citizens to stay at home, the nation’s saving ratio soared to a 46-year high to almost 20%. Furthermore, there is evidence from the RBA that credit card balances are being paid off faster. These are positive factors, which may push Australia out of the recession quicker once lockdowns and the Coronavirus are in the past.

Some analysts are not convinced the RBA is not doing enough. James McIntyre, Australia economist at Bloomberg Economics, stated, “with a sluggish demand outlook and a weaker labour market justifying further policy support, it is difficult for the RBA to make a case to hold back,” insinuating he believes that the RBA must do more to push Australia out of the slump.

It is essential to keep an eye on the other side of the equation, the U.S dollar, as the election approaches less than a day. Trade safe!

 

Related Posts

Week ahead – Fed Interest Rates, GDP

Week ahead – Fed Interest Rates, GDP

We have a relatively light data week ahead regarding the amount of significant data points coming out. However, the economic events are extremely significant in determining the state of their respective economies. Hope you all are staying safe. Here is your week ahead.

read more
Metals Mania, but has Silver lost its hype?

Metals Mania, but has Silver lost its hype?

In 2020, Silver had a legendary rise from its low during the peak of the Coronavirus lockdowns in March – up over 140%. Analysts (including me) attempted to justify its price and separate its strong correlation with Gold by arguing that Biden’s climate change policies will boost Solar Panels’ use, which extensively uses Silver. This may be a catalyst in the longer term.

read more

Black Bull Group Limited (trading name: BlackBull Markets) is a New Zealand registered and incorporated company (company number: 5463921).
We are also registered with the Financial Services Provider Register (number: FSP403326).

Black Bull Group UK Limited is registered in United Kingdom, Company Number - 9556804. Payment clearing services provided by: BlackBull Group UK Limited (Company Number - 9556804) Address - 483 Green Lanes, London, Greater London, United Kingdom, N13 485

Risk Warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any questions or concerns as to how a loss would affect your lifestyle.

All payments related to the Paysafe Group are facilitated by Black Bull Group Limited.

Copyright © 2021 Black Bull Group Limited. All Rights Reserved.

Share This