The Fed Have No Clue
Today’s the day.
The Reserve Bank of Australia (RBA) meet this afternoon, and it’s tipped that they’re going to reduce interest rates by 0.25% to 0.75%.
A new all-time low of the cash rate for Aussies.
Then, depending on your financial rag of choice, the guestimates are rolling in for when the next rate cut will come. One prediction I read over the weekend suggested a cash rate of 0.50% by June next year. Another said we’d hit that in the early months of 2020.
Perhaps the most amusing thing about all these rate cuts, is that these forecasts are coming from people who as recently as 2017 said the RBA would most definitely move up from 1.50%.
That the RBA would never dream of cutting rates…
Funny how wrong they were.
More to the point, the effectiveness of these rate cuts will be limited. For starters, apparently the Big Four banks have said they have no intention of passing on the rate cut.
To compound all of this, the Australian Financial Review noted yesterday the RBA’s hands are tied. As central banks around the world continue to lower their cash rate, the RBA must follow suit in order to avoid the Aussie dollar becoming too strong.
I’ll bring you a deep dive on all things RBA later in the week.
Instead, today Jim writes about how the Fed have lost all connections with what’s really going on in the US economy.
And it sounds an awful lot like what’s happening with the RBA.
Until next time,
Editor, The Daily Reckoning Australia