Why did the RBA cut rates?

Today, Australia’s Reserve Bank (RBA) cut interest rates by 25 basis points down to a new record low of 2.75%.

I believe that central banks always take their interest rate policy too far in either direction

Do you wonder why they make such moves, especially as they near these extremes?

Did the RBA cut rates to…..

  • lower the value of the Australian Dollar (trying to make it competitive versus other currencies)
  • stimulate growth in the economy (if so, how bad is the economy?)
  • to provide relief to borrowers and credit card abusers
  • to help government (funnily as it’s one week before the federal budget)
  • to force “savers” to invest (because now, after inflation, they are really earning negative interest rates)

I’m simply wondering what was their reason beyond their official statement.

3 Responses to Why did the RBA cut rates?

  1. Bill Pridham says:

    Check out Australia manufacturing report, exports below 09 levels

    Sent from my iPad

    • Thanks Bill. I guess the weaker exports that you highlight relates to the Aussie Dollar being too strong versus others. It’s funny how Australians tend to celebrate a stronger AUD as if the economy is all about buying cheaper “big screen” TV’s and taking trips to Disneyland?

      This sure doesn’t apply to the price of imported cars be them Japanese or European!

  2. Nilan Peduru says:

    I think its mainly to do with the Aussie Dollar. Japan and the US are devaluing there currencies to make them more competitive so the RBA has taken action.
    It’s being interesting reading about the George Soros shorting the Dollar…

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