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RBA cuts the cash rate 25pts to 4.25% and inflationary pressure falls

Written by Sam Coxhead on December 6th, 2011.      0 comments

3:05 PM (AEST) The Reserve Bank of Australia just cut the cash rate to 4.25% from 4.5% as was for the most part expected by the markets.
The slowing global economy, being lead by Europe, has seen the downside trend to inflation increase. This has opened up the way for easing of the cash rate to occur. Lower commodity prices will likely see lower capital expenditure overtime. Wage pressures have continued to lower and lending remains soft. They acknowledge that Chinese growth has softened somewhat, as policy makers intended. To what degree the escalated European situation is contributing with soon become known, but it is starting to look significant.
The RBA will maintain their poise ,and adjust policy accordingly moving forward. The reaction in the foreign exchange market has been a softer AUD across the board. The cut was around 80% priced in the interest rate market, and reaction appears in line with that.
Australian GDP tomorrow, and them the RBNZ monetary policy statement and Australian employment on Thursday are now the remaining Australasian focus for the week.
In Europe, the messages remain mixed. Positive moves by German and French officials have been countered by the placing of Europe on credit rating negative watch by ratings agency S&P, Germany included. Markets remain edgy and liquidity low. Accentuated moves are likely throughout the coming six weeks or so.
          Past 24 hours
  Current level Pre-RBA  % Chge since RBA   Low High
NZD/USD 0.7775 0.7775 0.00%   0.7754 0.7837
AUD/USD 1.0195 1.0240 -0.44%   1.0182 1.0274
NZD/AUD 0.7626 0.7592 0.45%   0.7576 0.7627
AUD/NZD 1.3113 1.3172 -0.45%   1.3111 1.3200
NZD/GBP 0.4879 0.4882 -0.06%   0.4964 0.4999
NZD/EUR 0.5817 0.5824 -0.12%   0.5788 0.5828
NZD/YEN 60.55 60.57 -0.03%   60.40 61.06
NZD/CAD 0.7927 0.7925 0.03%   0.7898 0.7947