QE tipped as rate cuts lose impact

Original article by David Rogers
The Australian – Page: 17 & 28 : 22-Oct-19

A number of economists now say the Reserve Bank of Australia could implement unconventional monetary policy measures in 2020. They include Westpac’s chief economist Bill Evans, who warns that quantitative easing may be necessary if the cash rate fall below 0.5 per cent. Michael Knox of Morgans Financial, Su-Lin Ong of RBC Capital Markets and Marcel Thieliant of Capital Economics have also flagged the prospect of quantitative easing. Financial markets have fully priced in a rate cut to 0.5 per cent by May.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, MORGANS FINANCIAL LIMITED, RBC CAPITAL MARKETS, CAPITAL ECONOMICS LIMITED, GOLDMAN SACHS AUSTRALIA PTY LTD

Cup day rate cut less likely on minutes

Original article by Matthew Cranston
The Australian Financial Review – Page: 4 : 16-Oct-19

Financial markets have priced in a 36 per cent chance that the Reserve Bank will reduce the cash rate in November, following the release of the minutes from the central bank’s October board meeting. Amongst other things, board members expressed concern about the impact of historically low interest rates on savers and the housing market. The general consensus of economists is that the cash rate will remain on hold until February.

CORPORATES
RESERVE BANK OF AUSTRALIA

Evans warns of negative impact of rate cuts

Original article by David Rogers
The Australian – Page: 27 : 10-Oct-19

Financial markets expect the cash rate to fall to 0.5 per cent by February, and market pricing suggests that there is more than a 50 per cent chance of further rate cuts by mid-2020. Westpac’s chief economist Bill Evans says the Reserve Bank should take note of declining consumer confidence when considering further rate cuts, and the "possible unintended consequences" of any move toward negative interest rates. The general consensus of economists is that fiscal policy would be more effective than unconventional monetary policy measures such as quantitative easing.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, RESERVE BANK OF AUSTRALIA, UNIVERSITY OF MELBOURNE. INSTITUTE OF APPLIED ECONOMIC AND SOCIAL RESEARCH, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, ROY MORGAN LIMITED, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, GOLDMAN SACHS AUSTRALIA PTY LTD, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AMP CAPITAL INVESTORS LIMITED

QE would kill finance and capitalism, McKibbin warns

Original article by John Kehoe
The Australian Financial Review – Page: 6 : 9-Oct-19

Former Reserve Bank board member Warwick McKibbin has cautioned against any move to reduce implement quantitative easing in Australia. He argues that unconventional monetary policy in Europe is merely propping up financially unsustainable businesses while restricting access to capital for new businesses. He adds that reducing interest rates below a certain level merely distorts capital without providing any economic stimulus. Some economists expect the cash rate to fall to 0.5 per cent in coming months.

CORPORATES
RESERVE BANK OF AUSTRALIA, BANK FOR INTERNATIONAL SETTLEMENTS, AUSTRALIAN NATIONAL UNIVERSITY

We’ve ourselves to blame for paying banks too much

Original article by Adam Creighton
The Australian – Page: 12 : 8-Oct-19

Australia’s banks have attracted widespread criticism for reducing their mortgate rates by about half of the 0.25 per cent official interest rate cut on 1 October. However, banks are entitled to pass on as much or as little of the cash rate cut as they like, and customers can easily switch to another lender if they are dissatisfied. Consumers effectively pay a loyalty tax for remaining with their existing lender; this may be more appropriately called a stupidity tax, as it raises some $6.3bn each year for mortgage lenders. While banks are the biggest beneficiary of the stupidity tax, it is paid across the economy.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Savers do it tough as banks hold off cuts

Original article by Jonathan Shapiro, Aleks Vickovich, Jemima Whyte
The Australian Financial Review – Page: 4 : 4-Oct-19

People who rely on interest income from their savings have been hard hit by the Reserve Bank of Australia’s aggressive monetary policy easing. Canstar notes that banks’ 12-month deposit rates have traditionally been about one per cent higher than the cash rate, but this has narrowed to 0.64 per cent. Term deposit rates and online savings account rates have both fallen sharply since the first of three official interest rate cuts in June, and Canstar’s Steve Mickenbecker says there is little scope for further reductions.

CORPORATES
RESERVE BANK OF AUSTRALIA, CANSTAR PTY LTD, UNIVERSITY OF TECHNOLOGY, SYDNEY, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, BANK OF QUEENSLAND LIMITED – ASX BOQ, SUNCORP BANK, MACQUARIE GROUP LIMITED – ASX MQG

RBA inflation goal requires negative rates

Original article by David Rogers
The Australian – Page: 27 : 3-Oct-19

Andrew Boak, the chief economist at Goldman Sachs, says there is a material risk that the Reserve Bank of Australia will reduce the cash rate to less than 0.5 per cent and implement a quantitative easing program. Boak adds that the central bank’s own macroeconomic model suggests that a negative cash rate would be needed to deliver on its inflation and employment targets over the next 2-3 years. Boak expects the cash rate to be cut by another 25 basis points in November, while financial markets have fully priced in a rate cut by February.

CORPORATES
GOLDMAN SACHS AUSTRALIA PTY LTD, RESERVE BANK OF AUSTRALIA, MORGAN STANLEY AUSTRALIA LIMITED, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, AUSTRALIA. DEPT OF THE TREASURY

RBA one step away from QE

Original article by Matthew Cranston, John Kehoe, Aleks Vickovich
The Australian Financial Review – Page: 1 & 4 : 2-Oct-19

The Australian dollar reached an intra-day low of $US66.94 in local trading on 1 October, after the Reserve Bank of Australia reduced the cash rate to 0.75 per cent. RBA governor Philip Lowe signalled that the central bank is prepared to further ease monetary policy if necessary. The third rate cut in 2019 has heightened expectations that the cash rate will fall to 0.5 per cent in November. Andrew Boak of Goldman Sachs warns that this may be insufficient to lift inflation to within the RBA’s target range over the next several years. He adds that this in turn could necessitate further rate cuts, as well as the potential for quantitative easing.

CORPORATES
RESERVE BANK OF AUSTRALIA, JP MORGAN AUSTRALIA LIMITED, UBS HOLDINGS PTY LTD, CITIGROUP PTY LTD, MORGAN STANLEY AUSTRALIA LIMITED, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN LABOR PARTY, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

Profit-taking possible even with interest rate cut

Original article by David Rogers
The Australian – Page: 28 : 1-Oct-19

Most economists expect the Reserve Bank of Australia to reduce the cash rate to 0.75 per cent on 1 October, and there is widespread expectation that it will fall to 0.5 per cent by February. Financial markets have priced in an 80 per cent chance of a rate cut in October. Although a rate cut is by no means certain, the Australian dollar could rally if the RBA opts to leave rates on hold, and subsequent profit-taking could see the local sharemarket retreat in the near-term. However, the RBA could potentially hold off on easing monetary policy until the outcome of the upcoming US-China trade talks.

CORPORATES
RESERVE BANK OF AUSTRALIA

RBA to cut twice more to 0.5pc, say economists

Original article by Sarah Turner
The Australian Financial Review – Page: 1 & 22 : 30-Sep-19

A quarterly survey of economists shows that there is general consensus that the Reserve Bank of Australia will reduce the cash rate to 0.5 per cent by mid-2020. Most of the respondents expect official interests to be cut by 25 basis points before the end of 2019, followed by another cut by June. However, Shane Oliver of AMP Capital and Alan Oster of National Australia Bank expect a cash of 0.5 per cent at the end of 2019. Futures markets have priced in a 76 per cent chance of a rate cut on 1 October, and fully priced in a rate cut in November.

CORPORATES
RESERVE BANK OF AUSTRALIA, AMP CAPITAL INVESTORS LIMITED, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ