Expected move from RBA cuts rate by 25 bp to 3%

4 Dec

RBAFollowing a full array of weakening data in Australia since the RBA held its hand steady at 3.25% in Nov, the CB has been forced to cut the cash rate by 25bp to end the year at 3%. The decision comes in line with market expectations, which had been pricing in over 90% chances of a cut today. The cut helps foster sustainable growth, RBA said.

RBA sees headline CPI reaching levels above 3% briefly. As stated: “Partly as a result of that [carbon price affecting consumer prices] headline CPI inflation will rise above 3 per cent briefly.” Although in general terms, RBA sees inflation consistent with medium term target. RBA adds that “a continuation of moderate wage outcomes and improved productivity performance will be needed to keep inflation low.” On investment, “generally outside the resources sector, remains relatively subdued” RBA notes.

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