Coppo on RBA's hold on cash rates

Bell Potter


Today the RBA held rates for eleventh straight month. The AUD rose to an intraday high of 0.7632 after initially falling from 0.7591 to 0.7571 immediately after the statement. This current rate easing cycle has been going now for 4 ½ years (begun on the 2nd Nov 2011) – it is one of the longest rate cut cycles I have ever seen. The previous longest was back in 1990 then Paul Keating had pushed rates up from 12.75% in April 1988 to a historic high of 18% BY September 1989. It was done in an attempt to kill inflation (it worked & inflation went back to the lowest levels since the 1960’s) … BUT the economic consequences on Australia were severe & dire for many– the recession began in July 1990 and went until 1991. With unemployment soaring from about 6% to 12% the RBA was forced to cut rates aggressively to try and save the economy.

Bell Potter Securities is a leading Australian stockbroking, investment and financial advisory firm that provides a comprehensive offering of financial services to a diversified client base that includes individuals, institutions and corporations.

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