Tuesday, June 5, 2012

RBA Forced to chase 90 day rate - downwards

The RBA cut the Cash Rate Target to 3.5% today after a 0.5% cut last month - chasing the 90 day rate downwards. The RBA should have passed on a full 0.5% cut, however, after the 0.5% cut last month they would be feeling some political pressure to avoid such a move.

If the 90 day rate remains unchanged or falls before the next RBA meeting, expect another 0.25% cut - historically the RBA keeps the cash rate lagging the 90 bill rate by about 0.15% on average - evidence the RBA are simply following market rates and not setting them.

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