Morning Report Thursday 22 January 2015
Will Australia follow Canada and slash interest rates?
Last night, we got yet another Central Bank surprise when Canada cut interest rates to 0.75%. The result was bond yields at record lows, equities rallied 1.8% and the Canadian dollar dropped 2.1% to its lowest level in over 5 years. The recent crash in oil prices has been the clear catalyst for this unexpected move and people are already talking of more cuts in the future that would likely send the local currency, nicknamed the “loonie” after the bird image on the CAD$1 coin, to much lower levels. Australia is in a very similar position to Canada with low commodity prices hurting our economy:
If we get reasonable inflation data next week the market will become convinced interest rate cuts are inevitable.
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