ECB & Bank of England cut rates
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The ECB and Bank of England both cut rates this week in response to the deterioration of demand and consumer confidence in the European economy.
The 16 country ECB cut rates by 0.50% to 1.50% while the Bank of England took the unprecedented step of of slashing rates in half to a record low of 0.50%.
The future of the European and UK economies are on a knife edge as consumers are failing to spend instead hoarding available cash with expectations the markets will further deteriorate. This logic however is the worst option as consumers will need to lead the economy out of this malaise.
With the banking system in tatters and nationalism of UK banks on the government agenda, the Euro zone as a long way to go till they can pick themselves up from this crisis.
RBA decision to keep rates stable raises questions
The RBA this week announced that interest rates to stay on hold this was met in some circles with applause and others questioning the logic of RBA governor Glenn Stevens.
Despite the economic performance of Australia faltering it is still comparing very well against fellow OECD countries and has arguably stood up as one of the best in the current downturn.
It is this performance while still a contraction in economic growth that helped determine the RBA board decision to keep rates the same at 3.25%, a 45 year low. Interest rates have been forecast to fall to around 2% this financial year but we are unlikely to see any big cuts like 0.75% and 1.00% as the RBA expects the stimulus to support the market in due course.
Do you think the RBA made the correct decision in not cutting rates in March? Share your thoughts by adding a comment.