The Reserve Bank of Australia slashed interest rates yesterday to an all time low of 0.75% which was largely in line with market expectations but the monetary statement was more dovish than analysts had been expecting when sent the Australian dollar spiraling downwards towards its lowest level in nearly a decade.
The RBA raised concerns over the state of the global economy and concerns on the state of the employment sector which they believe will make it difficult to hit the central banks inflation target.
The problems surrounding the current trade dispute between China and the US are also causing problems for the Chinese economy and with the former being Australia’s biggest trading partner, any slowdown there is likely to spill over to the Australian economy.
"The US-China trade and technology disputes are affecting international trade flows and investment as businesses scale back spending plans because of the increased uncertainty. In China, the authorities have taken further steps to support the economy, while continuing to address risks in the financial system. A slowing Chinese economy means the country will need fewer Australian minerals” said RBA governor Philip Lowe.
Mr Lowe also noted that the RBA will be keeping a close eye on matters over the coming months and unless there is a rebound in the jobs market and a marked improvement in the overall economy the bank may be forced to lower rates even further which is not going to sit well for the Australian dollar
"The board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time," MrLowe said.
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