Investors expect the Reserve Bank of Australia to ease its monetary policy. Such estimates followed minutes of the regulator's meeting held on May 1.
The RBA experts have been focusing on inflation that considerably decelerated in the last quarter. In this context, the bank cut CPI forecast: now inflation is seen at 2% at the end of 2012 rather than previously projected 2.5%.
As inflation is slowing, analysts have all grounds to believe that the Australian central bank will lower the interest rates further at its next meeting. As for May 1, the RBA brought the cash rate down to 3.75% from 4.25%.
What is more, the Reserve Bank of Australia got more pessimistic on outlook for the economy in 2012. The regulator slashed growth forecast from 3.5% to 3.0%. The change in the forecast was partly induced by an overbought aussie.
In the meantime, the RBA meeting minutes pushed the Australian dollar down to its one-year low. At the end of the trading day the aussie was worth as little as one US dollar and 1.8 cent. As analysts of Morgan Stanley say, the downward dynamics is set to remain in the long run.
Moreover, there are still risks mentioned earlier, namely uncertainties in the Eurozone crisis and waning demand.
