Global softness forced RBA to cut: Chronican

The numerous economic troubles facing the world, rather than any one large issue, played a role in the Reserve Bank of Australia’s decision to cut interest rates to a record low of 2.25 per cent, according to ANZ Australia CEO Phil Chronican.

Global softness forced RBA cut: Chronican

“There are a lot of things that have got a little bit worse in the global economy over the last few months,” he told BlueNotes in an exclusive interview immediately after the decision.

"A lot of things in the global economy have got a little bit worse."
Phil Chronican, CEO ANZ Australia

The RBA has cut the official cash rate by 0.25 percentage points after a record 17 months on hold. Markets had priced in a better-than-even chance of a cut. 

Chronican said the central bank was faced with falling commodities prices (including oil), renewed turmoil in Europe and a softer US market, which previously had been a source of strength in the world economy. 

“Not all of those things necessarily meant the Reserve Bank had to move on interest rates this time around,” he said. “But obviously they’ve looked at the sum total of that in terms of the outlook for Australia and felt that a move at this stage was prudent.” 

Chronican said there was no obvious Australian sector that may have forced the decision. He also touched on the effect of the cut on corporate debt costs and whether it will exacerbate fears in the Australian housing market. Watch the video to learn more. 

ANZ will make an announcement on home lending rates by Friday the 6th of February in line with its standard process.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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