6 June 2012
The Reserve Bank of Australia cuts its cash rate for the second month in a row – this time by 0.25% to 3.5%. In May the RBA took the slightly unusual step of reducing its official rate by 0.5% which was a sign that perhaps it was playing “catch up” with the market and wanted to be seen to lead rather than follow market developments – what market economists euphemistically call “being in front of the curve”.
This month the RBA reverted to its more usual practice of moving in 0.25% increments. The signal here is that it is back in control of events  – see yesterday’s press release by Reserve Bank Governor Glenn Stevens. Where to from here is less clear as it really depends on developments in the three major world economies – the USA, Europe and China.
Two interesting articles today by David Uren, the Australian’s economics correspondent look at the RBA decision and also whether our Treasury Department is preparing correctly for the next market set-back.