Reserve Bank leaks like a sieve

[banco]

They seem to be in the habit of leaking stuff to Fairfax these days:

Concern about a deteriorating economic outlook and a resurgent Australian dollar will force the Reserve Bank to cut interest rates on Tuesday, taking the official cash rate to an all-time low of 2 per cent and discounted mortgage rates to just 4.55 per cent.

The Australian dollar touched US80 ¢ on Thursday, a level the Reserve Bank governor Glenn Stevens has previously said was well above its fundamental value.

http://www.canberratimes.com.au/bus...-in-face-of-weak-economy-20150430-1mwyeu.html

 

[qldfrog]

Indeed, the only question is :
are these leaks "purposely" released?
A leak in itself is as efficient as an actual move..at least a couple of time until people come to see it as a bluff
I see a cut as well in the coming weeks but without actual government action against inflating the current bubbles, it is a dangerous move;
I also doubt the actual efficiency in term of economic boost but it is nevertheless needed if only to control the AUD .

 

[banco]

Indeed, the only question is :
are these leaks "purposely" released?
A leak in itself is as efficient as an actual move..at least a couple of time until people come to see it as a bluff
I see a cut as well in the coming weeks but without actual government action against inflating the current bubbles, it is a dangerous move;
I also doubt the actual efficiency in term of economic boost but it is nevertheless needed if only to control the AUD .

I dont' think the story would be as definitive about the rate cut if it wasn't an authorised leak. Curious that as soon as the bank shares start looking shaky they leak this.

 

[waterbottle]

Indeed, the only question is :
are these leaks "purposely" released?
A leak in itself is as efficient as an actual move..at least a couple of time until people come to see it as a bluff
I see a cut as well in the coming weeks but without actual government action against inflating the current bubbles, it is a dangerous move;
I also doubt the actual efficiency in term of economic boost but it is nevertheless needed if only to control the AUD .

The interesting thing is that the government is taking steps towards curbing the bubble and it is now becoming a mainstream concept (when compared to 2008-2012).
Vic is planning on increased taxes for foreign buyers.
The feds are planning on gaoling them/fining those who assist with illegal purchases.
The harm of negative gearing is being publicly discussed by citizens, social welfare organizations and parliament.

IMO there has been a definite change in thinking. Time will tell if this will be put into action.
My thoughts are that if a cut occurs in May/June, then the RBA is expecting the government to follow through on these thought bubbles.

 

[Tyler Durden]

I think it'll be on hold tomorrow.

 

[banco]

I think it'll be on hold tomorrow.

The story in the paper was basically an official leak so I'd say chances of it staying on hold are negligible.

 

[Wysiwyg]

They seem to be in the habit of leaking stuff to Fairfax these days:

At work they call it ringfencing where information is kept in house. Share buying blackouts is another control the company applies to employees.

 

[Uncle Festivus]

The RBA board is going down the same idiot path as all the other central banks, a path to mutually assured destruction of the financial kind. So the other 45% of the population who save and spend will simply contract again and keep saving but not spend! The rest who live beyond their means in debt won't be enticed to borrow any more 'at the margin' of low rates. Throw out all the text books about finance and economics because there's only 2 solutions to everything now - ZIRP and QE.

Not far away from having to pay to have deposits in a bank, and limit the use of cash!

Disgusting.

 

[banco]

The RBA board is going down the same idiot path as all the other central banks, a path to mutually assured destruction of the financial kind. So the other 45% of the population who save and spend will simply contract again and keep saving but not spend! The rest who live beyond their means in debt won't be enticed to borrow any more 'at the margin' of low rates. Throw out all the text books about finance and economics because there's only 2 solutions to everything now - ZIRP and QE.

Not far away from having to pay to have deposits in a bank, and limit the use of cash!

Disgusting.

I suspect when the property market eventually blows up the RBA will say they told APRA to do something about restricting loans so it's their fault.

 

[Tyler Durden]

I think it'll be on hold tomorrow.

Ok I got it wrong. I didn't think the RBA would have the balls to do that.

Interesting reaction on the ASX, which initially went up but then took a bit of a dive.

 

[banco]

Ok I got it wrong. I didn't think the RBA would have the balls to do that.

Interesting reaction on the ASX, which initially went up but then took a bit of a dive.

Presumably it was already baked into the price due to the leak.

 

[Tyler Durden]

Presumably it was already baked into the price due to the leak.

That would make sense, but then it should've stayed evenly level after the announcement?

 

[skyQuake]

That would make sense, but then it should've stayed evenly level after the announcement?

It wasn't baked in properly.

After the announcement, SPI rallied 50pts, AUDUSD fell 0.60c
This was the algos reacting to the rate cut.

Then actual people read the whole damn thing. Basically it hinted at an end to the rate cut cycle, ie no more cuts, potential rate rises down the track.
Thus SPI got belted, AUDUSD rallied. Note how bonds got hit and reacted faster than SPI

 

[banco]

I'd still like to know the rationale behind leaking it. I've read that they don't formally decide until the Tuesday. I wonder if the RBA is trying to force some board members to vote they way they want? "well it's already being leaked so we can't not cut"

 

[Klogg]

The RBA board is going down the same idiot path as all the other central banks, a path to mutually assured destruction of the financial kind. So the other 45% of the population who save and spend will simply contract again and keep saving but not spend! The rest who live beyond their means in debt won't be enticed to borrow any more 'at the margin' of low rates. Throw out all the text books about finance and economics because there's only 2 solutions to everything now - ZIRP and QE.

Not far away from having to pay to have deposits in a bank, and limit the use of cash!

Disgusting.

Have a read of this:
http://bwater.com/uploads/filemanag...hine_works__leveragings_and_deleveragings.pdf

If you read the section entitled "1934-1938 International Devaluations Follow the Dollar Devaluation", you'll notice it's happened before (currency wars to promote economic growth). The solution was to use QE to inflate the money supply, so that credit could once again grow (if you believe Dalio's ideas). Australia is not quite at this point (maximum 200 basis points to go), but many other countries are.

Remember, the RBA is here "to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people". If that means dropping rates because most people are leveraged up, then so be it.
(Note, I just sold my house, so I'm not part of 'most people')

 

[Tyler Durden]

It wasn't baked in properly.

After the announcement, SPI rallied 50pts, AUDUSD fell 0.60c
This was the algos reacting to the rate cut.

Then actual people read the whole damn thing. Basically it hinted at an end to the rate cut cycle, ie no more cuts, potential rate rises down the track.
Thus SPI got belted, AUDUSD rallied. Note how bonds got hit and reacted faster than SPI

Interesting.

What does this mean: "The Federal Reserve is expected to start increasing its policy rate later this year"

What is policy rate? Same as interest rate?

 

[Uncle Festivus]

Interesting.

What does this mean: "The Federal Reserve is expected to start increasing its policy rate later this year"

What is policy rate? Same as interest rate?

Yes, but the key words are 'is expected' - going on recent data they shouldn't but then again they are just glorified economists who continually get it wrong so they probably will raise?

 

[Smurf1976]

The RBA board is going down the same idiot path as all the other central banks, a path to mutually assured destruction of the financial kind.

Regardless of the longer term outcome, they're basically out of bullets now.

I mean seriously, we're down to 2% so there's not a lot further to fall. Not at zero yet, but we're close enough.

 

[McLovin]

It wasn't baked in properly.

After the announcement, SPI rallied 50pts, AUDUSD fell 0.60c
This was the algos reacting to the rate cut.

Then actual people read the whole damn thing. Basically it hinted at an end to the rate cut cycle, ie no more cuts, potential rate rises down the track.
Thus SPI got belted, AUDUSD rallied. Note how bonds got hit and reacted faster than SPI

A conclusion which surprises me. Last paragraph...

At today's meeting, the Board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand.

It doesn't seem like bottom of the cycle stuff.

 

[rimtas]

I mean seriously, we're down to 2% so there's not a lot further to fall.

It still has 8 cuts untill it reaches 0.
Current 2% is way too high if compared to the US and EZ.

I just wonder when they throwover the idea of budget surplus and start QE instead, but one way or another we get there.