WEEKEND ECONOMIST: Rates precipice

The RBA has noticeably dropped its inflation and growth forecasts. It now seems every board meeting is alive with the chance of a further reduction to the cash rate.

In its May statement on monetary policy the Reserve Bank has substantially reduced its inflation and growth forecasts. The overall tone of the statement has changed significantly with deflation and growth risks being emphasised. The implied case for further rate cuts is strong and it now appears likely that the board will be seriously considering further rate cuts at every board meeting for at least most of the course of 2012.


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