Central Banks: Policy challenges everywhere - ANZ

Research Team at ANZ, suggests that there are no free lunches for the RBA as after its decision to cut rates yesterday, the major banks only passed on half easing, while also lifting deposit rates.

Key Quotes

“This highlights an expectation that funding conditions for the banks are expected to get more difficult. Together with the fact that the AUD actually rose after the announcement, this result highlights the increasingly challenging environment in which central banks are operating in order to ensure that policy decisions are transmitted through to the broader economy.

This sits in a long line of challenges for central banks. Last week the Bank of Japan said that it was conducting a review of its policy framework, while overnight in the US Dallas Fed President Kaplan argued that monetary policy alone cannot carry the entire burden for growth, and structural reform and fiscal policy “need to join the menu of economic policy”. With Japan and the UK set to ease fiscal policy, it will be important to watch whether we are at the beginning of a global policy re-pivot away from monetary easing.”