Oliver’s Insights – RBA cuts rates to a new record low – why? will it work? how low will rates go? and what does it mean for investors?

Oliver’s Insights – RBA cuts rates to a new record low – why? will it work? how low will rates go? and what does it mean for investors?

The attached note looks at the Reserve Bank of Australia’s decision to cut the official cash rate by 0.25% to a new record low of 1.25%.

The key points are as follows:

  • The RBA’s latest rate cut is aimed at heading off a further slowing in growth which would threaten higher unemployment and lower for longer inflation.
  • Cutting the inflation target would be a big mistake.
  • More rate cuts are likely to be needed ultimately taking the cash rate to a low of 0.5% next year. Ideally this will be combined with more fiscal stimulus.
  • For investors it means low interest rates for even longer.

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