Invest in alarm clocks
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RBA should resist pressure to cut interest rates
Pressure is building for the Reserve Bank to cut official interest rates, even as early as next week. But it shouldn’t, for two reasons. First, and more trivially, it would undermine its own forward guidance, which promised a “period of stability” in interest rates for all of last year. Absent a disastrous surprise since December, the board should therefore, at least obliquely, foreshadow any changes itself. To avoid a speculative pile-in the Swiss National Bank had to surprise investors when it abandoned the franc’s euro peg. The RBA doesn’t have to surprise. Indeed, in contrast to the European gloom, the ... (full story)
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