Tuesday 2nd August 2016 - 6:04 pm

Glenn Stevens’ risks

by Alan Thornhill

Analysis

 

By Alan Thornhill

 

Twice this year, Glenn Stevens has done something that central bankers don’t like doing.

 

That is cutting interest rates to previously unprecedented levels

 

That happened first in May.

 

Then – again – from Wednesday.

 

Both time rates were cut by 25 basis points

 

The reason Reserve bank chiefs, like Glenn Steven, don’t like taking this step is  simple.

 

But not, necessarily, obvious.

 

After all,  young home buyers will generally welcome the relief they will get in their home loan repayments, when their banks pass, at least some of the benefit they receive on to them.

 

If that’s all there was to it, Mr Stevens would, undoubtedly be among the most popular men in the country right now.

 

But although he is, by all accounts, is a fine fellow, things aren’t as simple as that.

 

What  about those probably somewhat older people, we might call the Savers, who have been relying on a little interest income, perhaps through their superannuation accounts, to help them pay their grocery bills  in retirement.

 

There is another thing, too, that can keep central bankers awake at night, when interest  rates fall to unprecedented levels, on their watch.

 

That’s walking down a dark path, on a moonless night.

 

Who knows what might go wrong?


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