The Reserve Bank in Australia yesterday surprised many by cutting its cash cash rate to 2.25%. The market had priced in a 60% chance of a cut, while the Bloomberg survey suggested that 21 of 27 economists expected a hold. Its statement left the door open for further cuts, although it provided little specific forward guidance, with the previous ‘period of stability’ language removed.
The rate cut will almost certainly boost an already booming housing market. As the RBA noted in the statement, it “is working with other regulators to assess and contain economic risks that may arise from the housing market”. A housing bubble in the Sydney market is now a key risk to the medium-term outlook.
Economists are now predicting there will be a further cut to 2.00%, probably in May.
Back home The Co-operative Bank has a new, market-leading, 18-month fixed rate of 5.49%. See how it stack up here.
