A further rate cut in the next few months is all but certain after the US Federal Reserve signalled it will hold off on anticipated rate hikes.
After holding its key interest rate close to zero for years, the US Federal Reserve was widely predicted to start a monetary policy tightening cycle in June. However, that prediction has been watered down overnight after the central bank downgraded its economic growth and inflation prospects.
A statement made by the Federal Reserve on Thursday said it will likely wait until September before making its first rate increase in nine years.
As a result of this news, the Aussie
dollar – which has been under the scrutiny of the Reserve Bank for being too high – has been pushed higher, making the possibility of another rate cut in the next few months all but certain.
According to The Australian
, money markets are now pricing in a 100% chance of a rate cut in April or May, while the Australian dollar has climbed almost two cents to US78c. This has doubled since earlier this week, when the Reserve Bank noted that financial markets were expecting "around a 50%" probability of another reduction by May.