Restrictive interest rates are obsolete: A 50 basis point rate cut is urgently needed next week
Автор: Stephen Koukoulas
Загружено: 2025-05-11
Просмотров: 2263
Описание:
A cash rate around 3 to 3.25% is neutral - it is one that does not stimulate the economy, nor restrict its ability to grow.
When the key macro data on GDP growth, unemployment and inflation are on track, monetary policy should be neutral.
When the economy is weak, with unemployment rising, wages growth softening and inflation on target, policy should be accommodative - ie, below 3 to 3.25%.
For the here and now, the cash rate is 4.10%. Even the RBA acknowledge that this is restrictive.
This cash rate is completely at odds with the fundamentals and the outlook.
The RBA needs to get to neutral (perhaps lower) as soon as possible practically possible and it can take a step in getting there with a 50 basis point next week.
Economics and monetary policy need not be complex. Clap trap about sticky services inflation or a tight labour market - when there is little evidence in favour of this claim - needs to be put to one side.
If the RBA does not cut 50 basis points next week, it will be playing a very risky game with the jobs of tens of thousands of people the stakes in its economic modelling zealotry.
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