RBA rate cut down to 0.5%

[Silver260]

AUD is going up, why?!

To add to what others have already said....

The US cutting its rates has also weakened the USD slightly. Excluding any other rate cuts, I'm expecting the AUD to start softening.

Edit : The other reason it's going up, is that I put money on it last week.... So its probably going back to parity.... Lol

 

[BuggedOut]

Lowe has stated that out of the 4 monetary policy tools available and on the RBA's agenda, only two are being considered, namely forward guidance and asset purchases (the purchase of government debt). NIRP is not. Lending operations is not.

...and bankers have never lied or been wrong before...or even changed their minds as circumstances change or politicians apply pressure?

I'm not saying it's going to happen, only that it is possible and that it is poor form to be abusing / insulting people for believing it might happen. I do think that we will follow the US in whatever they do and Trump has already been pushing for negative rates - even before this latest crisis.

 

[mmm....shiney!]

...and bankers have never lied or been wrong before...or even changed their minds as circumstances change or politicians apply pressure?

I'm not saying it's going to happen, only that it is possible and that it is poor form to be abusing / insulting people for believing it might happen. I do think that we will follow the US in whatever they do and Trump has already been pushing for negative rates - even before this latest crisis.

Again, you’re not basing your opinion in the light of the evidence available. You’re merely speculating.

It is moronic thinking to make investment decisions based on speculation when the evidence points to the contrary. That doesn’t mean that new evidence won’t come to light, it just means at this stage we are not going to get negative rates.

There was another post made by another member in a different thread this morning which pretty much sums up how stupid some precious metals investors are ie tinfoil hat wearing irrational conspiracists.

 

[sgbuyer]

To add to what others have already said....

The US cutting its rates has also weakened the USD slightly. Excluding any other rate cuts, I'm expecting the AUD to start softening.

Edit : The other reason it's going up, is that I put money on it last week.... So its probably going back to parity.... Lol

The US still can cut rates 3-4 more times before going to zero.

 

[BuggedOut]

...you’re not basing your opinion in the light of the evidence available.

There is evidence that bankers lie.
There is evidence that bankers are wrong.
There is evidence that Australia follows foreign monetary policy trends.
There is evidence that foreign monetary policy trends include implementing negative interest rates.

Yes, I am speculating but that speculation is based on evidence. Calling me a moron for that is obnoxious behaviour. I thought you were better than that though you do seem to have become more obstinate and argumentative in recent years. More than I remember you being anyways.

 

[mmm....shiney!]

There is evidence that bankers lie.
There is evidence that bankers are wrong.
There is evidence that Australia follows foreign monetary policy trends.
There is evidence that foreign monetary policy trends include implementing negative interest rates.

Yes, I am speculating but that speculation is based on evidence.

What you've said is all true but it's not evidence that the RBA will adopt a NIRP.

Calling me a moron for that is obnoxious behaviour.

I never called you a moron.

I said: "It is moronic thinking to make investment decisions based on speculation when the evidence points to the contrary."

Are you making irrational investment decisions?

I thought you were better than that though you do seem to have become more obstinate and argumentative in recent years. More than I remember you being anyways.

That's the third time in recent months you've said you thought I was "better than that" (I've been counting them). When are you going to realise I'm obviously not? Abusing people is a flaw of mine. I'm an arsehole. You've put me on a pedestal I don't deserve to be on.

 

[BuggedOut]

Abusing people is a flaw of mine. I'm an arsehole. You've put me on a pedestal I don't deserve to be on.

LOL. Touche.

I guess on a lot of topics I agree with you and you often talk sense. I will make a mental note to downgrade my expectations from here on

 

[STKR]

Is your "evidence" as simple as taking the reassuring sound bites of Philip Lowe and other CB's at their word?

I would say it's evident the words, or claimed intentions, from Central Bankers should be taken with grain of salt. Their actions are what should be used as "evidence", not the BS they project to the mainstream.

Look at the economic environment that were in - record low interest rate adoption globally, record high debt levels (government, private and corporate), reliance on Unconventional Monetary Policy, over Inflated markets at every turn. FARK! If a 1.5% cash rate in Australia was declared as "Emergency levels", then what do we call 0.5%? What REAL tools do we have available to 'Grow' our way out of this mess?

Negative rates will require further desperation from the RBA. We are already seeing the RBA act out of desperation by lowering rates and analysing the effectiveness of negative rates. I think we're closer to going NIRPY than we are to getting back to the 'Emergency Level' cash rate of 1.5%.

 

[mmm....shiney!]

Is your "evidence" as simple as taking the reassuring sound bites of Philip Lowe and other CB's at their word? I would say it's evident the words, or claimed intentions, from Central Bankers should be taken with grain of salt. Their actions are what should be used as "evidence", not the BS they project to the mainstream.

That’s all we’ve got to go on. There is no evidence for NIRP. No actions that indicate NIRP. Unless you can cite some? Until we get an indication from them and we will as Lowe has said forward guidance will continue to be a tool they will employ, we can assume that we won’t get negative rates. There are no actions from the RBA that indicate that they will drop rates below 0.25%. I’ve seen it in mainstream media (and nut job alternative media), journalists claiming that the RBA will adopt negative rates or 0%, but they’re making that call because they don’t understand what they’re talking about.

Look at the economic environment that were in - record low interest rate adoption globally, record high debt levels (government, private and corporate), reliance on Unconventional Monetary Policy, over Inflated markets at every turn. FARK! If a 1.5% cash rate in Australia was declared as "Emergency levels", then what do we call 0.5%? What REAL tools do we have available to 'Grow' our way out of this mess?

MMT is the most likely candidate. The government will have to make fiscal policy decisions. But they don’t have to adopt MMT, they can enact fiscal policy changes like they normally have in the past. Uselessly.

Negative rates will require further desperation from the RBA. We are already seeing the RBA act out of desperation by lowering rates and analysing the effectiveness of negative rates. I think we're closer to going NIRPY than we are to getting back to the 'Emergency Level' cash rate of 1.5%.

Yep the RBA has analysed the effectiveness of negative rates and found them wanting. Lowe talked about the problems in his address to the press club at the end of 2019. Hence why they’re not on the agenda. There’s a separate thread that looks at that speech.

 

[madaw1]

What evidence do you have that the RBA will introduce negative rates?

I don’t have any evidence-as I’ve said in my previous posts no one has. The interest can go to 0% or even to - 0.5% why not (that’s my thinking).Your evidence ,that the interest will stop at 0.25% is based on the word of Mr.Lowe and his team. This can be true as well ,but if the political and economic circumstances will change ,the ceiling of 0.25% will change as well. When the interest was around 3% (correct me if I’m wrong) Mr Glenn Stevens was very confident that we require only 3 more cuts to interest. Based on this assumption you would be 99% confident that the interest will go to max.2.25%. Well, the rest is history….

 

[mmm....shiney!]

The interest can go to 0% or even to - 0.5% why not (that’s my thinking).Your evidence ,that the interest will stop at 0.25% is based on the word of Mr.Lowe and his team. This can be true as well ,but if the political and economic circumstances will change ,the ceiling of 0.25% will change as well.

I think there's a technical reason why 0.25% is the effective floor. I've tried to find an explanation and could really only come up with the explanation that if the cash rate is say 0%, or even lower then that can cause a liquidity trap, where consumers choose to save their cash. Which is happening, compounded by the fact that many economies are in a balance sheet recession. many people are finding it harder to make enough money to meet their needs and desires, so they're reluctant to spend , choosing to either pay down debt or save for the future. I think that someone else on this forum explained why 0.25% is the effective ZLB in another thread, it may have been @Oddjob.

In Switzerland and Japan as an example, even though the official cash rate is negative, the rates for savings accounts are positive. The negative rates in Japan for example only apply to large deposits I think, or Switzerland I can't remember.

the interest was around 3% (correct me if I’m wrong) Mr Glenn Stevens was very confident that we require only 3 more cuts to interest. Based on this assumption you would be 99% confident that the interest will go to max.2.25%. Well, the rest is history….

You would be confident.

But cutting rates is a different policy to enacting negative rates. And Philip Lowe has made it clear that once 0.25% is reached then they will explore QE instead of cutting the cash rate.

 

[madaw1]

Using that line of logic you can argue that Jesus Christ was real. There are plenty of certainties in life. There is nothing rational about either a belief in God or a belief that the RBA will introduce negative rates because there is no evidence to support either belief.

Mr. @mmm….shiney! I can see form you post that you need always some sort of proof to call the outcome-rational. If I don’t see it/I can’t see God/, if it’s not reported/by media/,not written down/by some very well recognised paper/ I can’t touch it I will not believe it. For 60 years we been told that God’s particles/Boson/ are there. We were not able to see them ,touch them or feel them. Did it mean,that they didn’t exist-was this irrational thinking? Suddenly in 2012 we we able to see them-something irrational become rational. If we can’t see the God it doesn’t mean it is not there or RBA won’t introduce negative rates because there is no evidence (not yet) to support it…

 

[madaw1]

And Philip Lowe has made it clear that once 0.25% is reached then they will explore QE instead of cutting the cash rate.

Hopping he will keep the promises...

 

[madaw1]

The negative rates in Japan for example only apply to large deposits I think, or Switzerland I can't remember.

My friend in Switzerland was paying around $400 when he kept $100000 in Bank there....

 

[mmm....shiney!]

If we can’t see the God it doesn’t mean it is not there or RBA won’t introduce negative rates because there is no evidence (not yet) to support it…

No it doesn't mean God is not there. It just means you can't prove God exists. The same with NIRP. You can point at 2 or 3 other countries and the Eurozone but that's not proof we'll get a NIRP. All that is is an observation of what other CBs have implemented.

Now if the evidence changes, then obviously I'll have to reassess my position. But I'm 99% confident that I won't have to consider negative rates, instead I'll be thinking about the impact of QE and fiscal policy and the opportunities I may be able to take advantage of if I'm smart enough. I'm not wasting my time on the consequences of negative rates on my financial health. I've got more pressing needs to consider.

Have you given thought to QE and fiscal stimulus and the opportunities they may present to you for building wealth?

 

[mmm....shiney!]

Hopping he will keep the promises...

I don't care if he doesn't because negative rates won't impact my savings because they don't apply to savings accounts.

My friend in Switzerland was paying around $400 when he kept $100000 in Bank there....

That would probably be because of a deposit charge because it's a substantial amount, not a result of negative rates. There'd be a really easy workaround for that, multiple accounts. Current interest rates on savings accounts from my research are from 0% to 0.25%.

 

[Oddjob]

There are two interest rates...real and nominal.....and we have had negative real interest rates since 2017 when inflation exceeded the OCR. Regardless of whether the RBA drops the OCR (nominal) to zero or a negative X (with charge on depos as a result), those with savings have been going out the door backwards for close on three years....sadly most Australians aren't aware.

IMO the RBA won't go past a zero OCR into negative territory as they can't risk the chance of a bank charging negative interest and having deposit holder pull their cash from that bank......bad for 6 o'clock new PR too.

 

[STKR]

Until we get an indication from them and we will as Lowe has said forward guidance will continue to be a tool they will employ, we can assume that we won’t get negative rates.

That's not a well calculated assumption. Forward Guidance isn't a real tool. These markets are fragile, along with our economy and financial system. Forward guidance is being used as means to inject short term confidence into a twitchy market.

The question that needs to be answered is: Where do we go from here when we have a recession? Do you really think interest rate cuts won't be on the table?

The laws restricting cash will be in place this year and as per the IMFs article: "CASHING IN: HOW TO MAKE NEGATIVE INTEREST RATES WORK"; these cash restrictions are a prerequisite for negative rates.

https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/

I would say the fact we are at 0.5% already, plus other countries going negative, plus the cash restriction bill going through parliament right now, plus the IMF's "Cashing in" article, is more of a calculated assumption as to what direction we're headed than your willingness to take a central bankers word for it. You're the one who is speculating.

I'm sure the cash restriction bill isn't news to you, nor is the IMF article. So why hold the view that we won't see negative rates?

 

[madaw1]

I don't care if he doesn't because negative rates won't impact my savings because they don't apply to savings accounts.

Me too-who on earth keeping any money in Bank in such low interest environment...

 

[sgbuyer]

My friend in Switzerland was paying around $400 when he kept $100000 in Bank there....

$400 is not a lot. I'm just wondering what's the interest rate before people really start pulling out cash from the bank?

How about negative 2% a year?