Australia Interest Rates
Australia Interest Rates
During the September meeting, the Reserve Bank of Australia lowered its’ official cash (OCR) rate for the third time this year, to a new record low of 0.75 percent, cutting rates by 25 bps. The Reserve Bank has stated the rate cut has been to support employment and income growth for the Australian economy. Aiming to provide greater confidence that inflation will be consistent with the medium-term target.
Furthermore, Australian Policymakers signaled the need for an extended period of low interest rates, stating the central bank is prepared to continue the monetary policy ease if needed.
Interest rate cuts almost always result in the devaluation of a nation’s currency, and it has been no different for this rate cut. With the AUD/USD continuing strong downward movement this month following the Reserve Banks’ announcement. The Aussie dollar currently trading at $0.66985 level.
However, historically monetary policies have proven to be effective only in the short run, as money neutrality takes effect in long-term periods. The idea that money is neutral is derived from economic theory that explains, as a Reserve Bank increases the money supply, it essentially means an increase cash in the consumers pocket, driving up consumption of individuals, in turn pushing prices of goods upwards. Thus, in the long run inflation neutralises the increase in money supply.
This week’s jobless claims data has hit unprecedented numbers. The number jumped to 3.28 million. Initial expectations of 1-1.5 million, which was still a very high estimate, were blown out of the water.
The New Zealand Dollar is fighting it’s way back up as the country enters it’s first official day of nationwide lockdown. It posted a 0.67% gain for the trading day, up to 0.58390 cents against the US Dollar. Just a week ago the NZD had dropped to 0.56, and looked ready to hit the 55 cent mark, as news broke of Air New Zealand’s layoffs.
The Nikkei 225, or Japanese Stock Index had an 8% gain for the day, following on from its 7% gain from the previous day. Less than a week ago the Nikkei had just hit lows not seen since 2017, falling below 20,000 points. However in just 2 days it has made back its losses and is now rapidly on the rebound back to the 20,000 mark.
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