While the Reserve Bank of Australia will likely cut interest rates by another 25 bps during the June quarter at the latest, a cash rate of 2% may well be the low point in the central bank's easing efforts--provided that the U.S. Federal Reserve begins raising rates in the second half of 2015, says David Scutt, market strategist at investment firm Scutt Partners in Sydney. A subsequent fall in the Aussie dollar against the U.S. currency would take pressure off the RBA, Mr. Scutt argues, adding that "there is a risk that recent falls in commodity prices will be transitory in nature, something that coupled with the lower Australian dollar will likely boost tradable inflation in Q4 2015/Q1 2016." In this case, the RBA "as an inflation-targeting Board" may find it hard to justify further rate cuts. (vera.sprothen@wsj.com)
(END) Dow Jones Newswires
February 10, 2015 23:10 ET (04:10 GMT)
Description: Australia's Interest Rate May Hit Low Point at 2% -- Market Talk
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