Financial markets widely anticipated the Reserve Bank's decision not to cut official rates. Merrill Lynch chief economist Peter Osborne summed up the general response to the central bank's decision. We believe this is a temporary pause by the RBA, with the cash rate likely to be lowered by between 25 and 50 basis points at the June meeting. Consecutive rate cuts totalling 125 basis points in the three previous months, higher than expected inflation in the March quarter and stronger than anticipated US GDP growth for the first quarter of 2001 probably swayed the RBA to leave rates unchanged. Mr Osborne said the expected 50 basis points cut in official rates in the US at the next Federal Reserve policy meeting on May 15 would open the way for a Reserve Bank rates cut in June.
Trends are very important for the Australian dollar.
The downward trend in the Aussie over the first three months of 2001 became almost a oneway bet for global fund managers and investment banks. A break in the oneway traffic has been important in paving the way for the current rally. Mr James still believes another quarterpercentagepoint rate cut is probably on the horizon, although the end of the easing cycle may soon be evident. The Age Company Ltd 2001. Any unauthorised use, copying or mirroring is prohibited.