Australia’s Rate-Cut Hurdle Is Higher Than Bond Market Reckons
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The Reserve Bank of Australia is showing markets that it’s no pushover when it comes to interest-rate cuts, confounding traders for two meetings in a row by keeping its cash target unchanged at a record low.
Governor Glenn Stevens held his benchmark at 2.25 percent on Tuesday in Sydney, frustrating investors who had priced in a 75 percent probability of a reduction. Economists from Australia & New Zealand Banking Group Ltd. and Royal Bank of Canada say policy makers may be setting a higher bar for further easing, after dropping borrowing costs by 2.5 percentage points since late 2011.