Given the current market gyrations, we are going to examine the latest critical data each day, because a week is a long time in politics but a lifetime on the markets at the moment…
Tag: Monetary Policy
UK Cuts The Cash Rate And Releases Liquidity Buffers
Overnight the Bank of England cuts the UK cash rate by 0.5% to 0.25%, cut the banks’ liquidity buffer to zero, and announced extra funding for banks to lend to businesses, all in response to the virus. The Prudential Regulation Authority (PRA) said that banks should not increase dividends or other distributions, such as bonuses, in response to these policy actions.
The Bank is coordinating its actions with those of HM Treasury in order to ensure that initiatives are complementary and that they will, collectively, have maximum impact. The Bank continues to co-ordinate closely with international counterparts. We will discuss the budget spend, also announced today in a separate post.
The bank said that although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months. Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies. Such issues are likely to be most acute for smaller businesses. This economic shock will affect both demand and supply in the economy.
At its special meeting ending on 10 March 2020, the Monetary Policy Committee (MPC) voted unanimously to reduce Bank Rate by 50 basis points to 0.25%. The MPC voted unanimously for the Bank of England to introduce a new Term Funding scheme with additional incentives for Small and Medium-sized Enterprises (TFSME), financed by the issuance of central bank reserves. The MPC voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.
The reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.
When interest rates are low, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn could limit their ability to cut their lending rates. In order to mitigate these pressures and maximise the effectiveness of monetary policy, the TFSME will, over the next 12 months, offer four-year funding of at least 5% of participants’ stock of real economy lending at interest rates at, or very close to, Bank Rate. Additional funding will be available for banks that increase lending, especially to small and medium-sized enterprises (SMEs). Experience from the Term Funding Scheme launched in 2016 suggests that the TFSME could provide in excess of £100 billion in term funding.
The TFSME will:
- help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that businesses and households benefit from the MPC’s actions;
- provide participants with a cost-effective source of funding to support additional lending to the real economy, providing insurance against adverse conditions in bank funding markets;
- incentivise banks to provide credit to businesses and households to bridge through a period of economic disruption; and
- provide additional incentives for banks to support lending to SMEs that typically bear the brunt of contractions in the supply of credit during periods of heightened risk aversion and economic downturns.
To support further the ability of banks to supply the credit needed to bridge a potentially challenging period, the Financial Policy Committee (FPC) has reduced the UK countercyclical capital buffer rate to 0% of banks’ exposures to UK borrowers with immediate effect. The rate had been 1% and had been due to reach 2% by December 2020.
The FPC expects to maintain the 0% rate for at least 12 months, so that any subsequent increase would not take effect until March 2022 at the earliest.
Although the disruption arising from Covid-19 could be sharp and large, it should be temporary. Such economic disruption should have less of an impact on the core banking system than recent stress tests run by the Bank have shown the system can withstand. Those stress tests demonstrated that banks would be able to continue to lend to businesses and households even while absorbing the effects of substantial, prolonged economic downturns in both the UK and the global economies, as well as falls in asset prices much larger than experienced in recent weeks.
Given the resilience of the core banking system, businesses and households should be able to rely on banks to meet their need for credit to bridge through a period of economic disruption.
The release of the countercyclical capital buffer will support up to £190 billion of bank lending to businesses. That is equivalent to 13 times banks’ net lending to businesses in 2019. Together with the TFSME, this means that banks should not face obstacles to supplying credit to the UK economy and to meeting the needs of businesses and households through temporary disruption.
The FPC and the Prudential Regulation Committee (PRC) will monitor closely the response of banks to these measures as well as the credit conditions faced by UK businesses and households more generally.
The release of the countercyclical capital buffer reinforces the expectations of the FPC and the PRC that all elements of banks’ capital and liquidity buffers can be drawn down as necessary to support the economy through this temporary shock. In addition, the Prudential Regulation Authority (PRA) has today set out its supervisory expectation that banks should not increase dividends or other distributions, such as bonuses, in response to these policy actions.
Major UK banks are well able to withstand severe market disruption. They hold £1 trillion of high-quality liquid assets, enabling them to meet their maturing obligations for many months.
In response to the material fall in government bond yields in recent weeks, the PRC invites requests from insurance companies to use the flexibility in Solvency II regulations to recalculate the transitional measures that smooth the impact of market movements. This will support market functioning.
The Bank of England has operations in place to make loans to banks in all major currencies on a weekly basis. Banks have pre-positioned collateral with the Bank of England enabling them to borrow around £300 billion through these facilities.
The actions announced today by the three policy committees of the Bank of England comprise a comprehensive and timely package to allow UK businesses and households to bridge a temporarily difficult period and thereby to mitigate any longer-lasting effects of Covid-19 on jobs, growth and the UK economy.
The Virus and the Australian Economy According To The RBA
RBA Deputy Governor Guy Debelle gave a keynote Address at the Australian Financial Review Business Summit. It was a summary of how the Bank is seeing developments in the economy at the moment. As normal, the story was the economy was doing quite well, until the onset of the coronavirus. And once it passes things will revert to this trend.
They admit that the global economy will be materially weaker in the first quarter of 2020 and in the period ahead. Australia will see at least a 0.5% fall in growth in the current quarter, but it is just too uncertain to assess the impact of the virus beyond the March quarter, he said. Despite the fact that spreads on Australian bank bonds have widened, yields remain at levels that are still very low historically, and banks are strongly capitalised.
Weirdly, he fails to discuss the Fed’s ongoing repo operations and growing balance sheet. John Adams and I released a show on this just today:
Here is the speech in full:
The December quarter national accounts confirmed our assessment that the Australian economy ended 2019 with a gradual pick-up in growth. Growth over the year was 2¼ per cent, up from a low of 1½ per cent. Consumption growth was a little stronger in the quarter, although still subdued. We had estimated that the bushfires will subtract around 0.2 percentage points from growth across the December and March quarters, but besides that, economic growth was set to continue to pick up supported by low interest rates, the lower exchange rate, a rise in mining investment, high levels of spending on infrastructure and an expected recovery in residential construction.
On the global side, around the turn of the year there were indications that the global economy was coming out of a soft patch of growth. The trade tensions between China and the US had abated, surveys of business conditions were picking up and industrial production was improving. Financial conditions were very stimulatory and supporting the pick-up in global growth.
Since then, there is no doubt that the outbreak of the virus has significantly disrupted this momentum, initially in China and now more broadly. We do not have a clear picture yet on the disruption to the Chinese economy caused by the virus and the measures put in place to contain the virus. But the following two graphs provide some sense of the significant disruption to the Chinese people and economy.
The coal consumption graph (Graph 1) shows the regular significant decline in production around Chinese New Year. But this year, the return to normal production has been significantly delayed. There was no ramp up in production after the holiday period, and we are now more than four weeks past the point where the Chinese economy is normally back to full-scale production. The straight arithmetic of losing a substantial amount of output over a period of several weeks implies a significant hit to economic activity. The road congestion graph (Graph 2) tells a similar story of a protracted period of low output.
Both show that the Chinese economy is now only gradually returning to normal. Even as this occurs, it is very uncertain how long it will take to repair the severe disruption to supply chains.
In the meantime, the virus has spread to other countries. They too are beginning to suffer significant disruptions, the extent and duration of which is unknown at this time.
The conclusion is that the global economy will be materially weaker in the first quarter of 2020 and in the period ahead.
In terms of the effect on the Australian economy, we have estimated the direct impact on the education and tourism sectors in the March quarter. Graph 3 shows the normal profile of visitor arrivals into Australia. Since January, inbound airline capacity from China has declined by 90 per cent, which gives a guide to the size of the decline in arrivals from China. Up until recently, tourist arrivals from other countries had held up reasonably well but that may no longer be true. From our liaison with the education sector, including the universities, as well as student visa numbers, we have information on the number of foreign students who have been unable to resume their studies. Graph 4 shows the country of origin of foreign students in Australia.
We have used this information to estimate the impact of the virus in these two sectors of the economy. The estimate is approximate, but at this stage we think the decline in services exports in the March quarter will amount to at least 10 per cent, roughly evenly split between lower tourism and education exports. As service exports account for 5 per cent of GDP, this translates into a subtraction from growth of ½ per cent of GDP in the March quarter from these two sources.
Through our business liaison program we are gathering information on supply chain disruptions which are affecting the construction and retail sectors in particular. Clearly we are still only in the early weeks of March, so the picture can change from here.
It is just too uncertain to assess the impact of the virus beyond the March quarter.
Our liaison with the resources sector does not indicate any material disruption to exports of iron ore and coal at this stage. Indeed, iron ore and coal prices have been resilient. Disruptions to Chinese domestic production of iron ore and coal have been a factor in this, which has resulted in more use of imported resources. Another is the expectation that the Chinese policy response will involve a significant amount of infrastructure spending which will benefit bulk commodities. The movements in these commodity prices stand in contrast to the large decline in the oil price, which will flow through to LNG prices (Graph 5).
I will now summarise recent developments in financial markets. There has been a large increase in risk aversion and uncertainty. The virus is going to have a material economic impact but it is not clear how large that will be. That makes it difficult for the market to reprice financial assets.
Policy interest rates have been reduced in some countries, including Australia, and further reductions are expected where that is possible. Currently market pricing implies a reduction of between 75 and 100 basis points in the Fed’s policy rate at their meeting next week.
Government bond yields have declined to historic lows, because of the shift downwards in actual and expected policy rates, reduced expectations for growth and a flight to safety (Graph 6). The 25 per cent fall in oil prices on Monday morning has also led to lower expectations of inflation. The 10 year US treasury yield reached a low below 35 basis points on Monday, including a 25 basis point decline at the opening of trade in Asia. It has since risen to be around 65 basis points at the time of writing.
Australian government bond yields have been driven by the global developments. They haven’t declined as much as US Treasuries, such that the spread between the 10 year yields is now slightly positive, having been negative over the past two years. At the time of writing, the Australian government can borrow for 10 years at 75 basis points.
Equity prices have fallen by as much as 20 per cent since their all-time peak of less than a month ago, although the Australian market rebounded on Tuesday (Graph 7). The falls have been particularly large for companies in the oil sector, as well as tourism.
Corporate bond spreads have widened. Through the first part of this move, the widening in large part reflected the rapid shift downwards in the risk free (government bond) curve. Investment grade bond spreads widened but investment grade yields actually fell (Graph 8). In the last few days though, we have seen yields rise along with the spreads. The high yield sector has seen a marked rise in yields and spreads, particularly in the US reflecting the prevalence of energy companies in that market. Bond issuance has been extremely low, in part because issuers do not want to appear to be in desperate need of funds in a dislocated market. It is also worth noting that just as equities prices have fallen from historic highs, so too have corporate bond prices fallen from historic highs.
Liquidity in fixed income markets has been poor at times, including in US Treasuries. The liquidity environment has changed considerably in the past decade in response to changed regulations. The banking sector is much less willing and able to warehouse risk and provide liquidity than in the past.[2]
The Australian banking system is well capitalised and is in a strong liquidity position. The Australian banks had raised a significant amount of wholesale funding before the disruption to markets and deposit inflows are robust. They are resilient to a period of market disruption. Spreads on Australian bank bonds have widened, although yields remain at levels that are still very low historically. We have not seen any particular sign of pressure in our daily market operations to date. The spread between the bank bill swap rate and the expected policy rate (OIS) has risen in recent days but remains low, nothing at all like what occurred in GFC.
Exchange rate volatility has been very low for a considerable period of time, but has picked up in the past few days. However it still remains considerably lower than volatility in other financial markets. The yen has appreciated by as much as 10 per cent against the US dollar, as Japanese investors repatriate funds, as normally occurs in these type of situations (Graph 9). More surprisingly, the euro has also appreciated against the US dollar. Market intelligence indicates that part of the reason for this is the liquidation of trades that were funded in euros and invested in higher yielding assets such as emerging market bonds. The sharp narrowing in the interest differential with the US has also contributed.
The Australian dollar has depreciated by 6 per cent since the beginning of the year to decade lows against the US dollar and on a trade-weighted basis (Graph 10). This will provide a helpful boost to the Australian economy and has occurred despite the prices of the bulk commodities, iron ore and coal, remaining resilient.
Turning to monetary policy, the Board met last week and decided to lower the cash rate by 25 basis points to 0.5 per cent. This decision was taken to support the economy by boosting demand and to offset the tightening in financial conditions that otherwise was occurring.
The reduction in the cash rate at the March meeting was passed in full through to mortgage rates. The cash rate has been reduced by 100 basis points since June. This has translated into a reduction in mortgage rates of 95 basis points. This has occurred through the combination of a reduction in the standard variable rate of 85 basis points, larger discounts to new borrowers and existing borrowers refinancing to take advantage of larger discounts. While a lower and flatter interest rate structure puts pressure on bank margins, it is important to remember that the easing in monetary policy will help support the Australian economy which in turn supports the credit quality of the banks’ portfolios of loans.
The virus is a shock to both demand and supply. Monetary policy does not have an effect on the supply side, but can work to ensure demand is stronger than it otherwise would be. Lower interest rates will provide more disposable income to the household sector and those businesses with debt. They may not spend it straight away, but it brings forward the day when they will be comfortable with their balance sheets and resume a normal pattern of spending. Monetary policy also works through the exchange rate which will help mitigate the effect of the virus’ impact on external demand.
The effect of the virus will come to an end at some point. Once we get beyond the effect of the virus, the Australian economy will be supported by the low level of interest rates, the lower exchange rate, a pick-up in mining investment, sustained spending on infrastructure and an expected recovery in residential construction.
The Government has announced its intention to support jobs, incomes, small business and investment which will provide welcome support to the economy. The combined effect of fiscal and monetary policy will help us navigate a difficult period for the Australian economy. They will also help ensure the Australian economy is well placed to bounce back quickly once the virus is contained.
Monetary Policy with very low interest rates
The Reserve Bank of New Zealand, Te Pūtea Matua, is taking proactive steps to ensure it is well positioned to effectively and efficiently manage New Zealand’s monetary policy in an environment of very low interest rates.
In a speech launching its Principles on Using Unconventional Monetary Policy, Reserve Bank Governor Adrian Orr said as kaitiaki (caretakers) of Te Pūtea Matua, the Bank’s activities involve continuous assessment of our monetary policy framework, including the most effective tools and their best application.
Mr Orr said the Reserve Bank has not, and still does not, need to use alternative monetary policy instruments to the OCR, but it is best to be prepared.
“An inability to predict what might happen next is no excuse for not preparing for what could happen. That’s true for businesses, governments and central banks. It is in light of both economic theory and recent global experience that we have been assessing what alternative monetary policy tools may be available to the Reserve Bank of New Zealand – and their relative desirability. We are fortunate, unlike many other OECD economies, to have the time to prepare for such possible needs.”
The Reserve Bank typically implements monetary policy by controlling the Official Cash Rate but as interest rates fall, this tool could be pushed to its limit in the future. Given this, in recent years, the Reserve Bank has been considering the unconventional monetary policy tools and policy framework that it would use to meet its policy targets.
The work to develop the Reserve Bank’s preparation for unconventional monetary policies has involved:
- Identifying the suite of possible ‘unconventional monetary policy tools’ available to the Reserve Bank;
- Defining and making explicit the criteria the Reserve Bank would use to assess these tools, against both each other and also alternative policies all together (e.g., fiscal policy options);
- Considering the relative benefits and costs of the tools, so as to operate on a ‘least surprise’ basis, and to ensure the Reserve Bank works in collaboration and with the agreement of fiscal authorities;
- Considering not just the monetary policy efficacy of the tools, but also broader considerations related to our financial stability and efficiency mandate; and
- Ensuring the tools are actually able to be utilised, including working with the important financial institutions that make up our system.
“We are confident of our success in assessment and implementation, but we are also aware that these tools work best when supported by wider stabilisation policies and additional macroprudential considerations. In the event we ever had to use these unconventional tools, our goal would be to ensure a strong and sustained increase in economic activity, with inflation expectations remaining well-anchored on our target mid-point.”
In the coming weeks the Reserve Bank will release a series of technical papers explaining the tools in more detail, examining their pros and cons, and outlining how they would potentially be used.
Note:
The principles and speech do not discuss current economic conditions or the Reserve Bank’s outlook for the Official Cash Rate (OCR). The Reserve Bank’s next OCR decision is scheduled for March 25.
The Bank remains prepared in its business continuity role to ensure a well-functioning financial system, including ongoing consumer and business access to credit and cash, liquidity to the banking system and a stable payments and settlements system.
Negative Interest Rates Are Coming – Watch Your Cash!
We look at the latest trends on Australian Bonds, Credit Markets and the recent IMF paper on negative interest rates – which they link to the need to restrict cash. This will not end well.
https://www.imf.org/external/pubs/ft/fandd/2020/03/what-are-negative-interest-rates-basics.htm
Rate Cuts Don’t Cure Viruses
As expected the RBA cut the cash rate to 0.5% “the Board took this decision to support the economy as it responds to the global coronavirus outbreak”.
All the major banks passed on the cut in full (thanks to severe political pressure), though gritted teeth. The profit pressure at the banks just went up a notch, on our modelling, a potential fall of more than 3%, though for some regionals perhaps double that. Players like Suncorp also passed on the cut.
The Government has said there will be a targetted package to assist businesses soon, and before the May budget. The savings deeming rate is now completely out of wack with even the very best deposit rates available, so pensioners, those on Government support and welfare are being hit by the gap. The deeming rate for singles is currently 3.0% for assets over $51,200 and 1.0% for those under that threshold. One way the Government is “balancing” the budget
Overnight the FED cut, in an expected “unexpected” drop of 50 basis points. This was the first time the Fed had cut by more than 25 basis points since 2008 and the reduction marks a stark shift for Powell and his colleagues. They had previously projected no change in rates during 2020, remaining on the sidelines during the election year, after lowering their benchmark three times in 2019. They of course rejected any political influence despite Trump’s consistent pressure to drop rates.
Its become very clear that central bankers are worried not only about the economic impact of COVID-19 but also the losses in the stock market.
The Fed said the coronavirus outbreak had disrupted economies in many countries and these measures will weigh on activity for some time. The magnitude and persistence of the impact is uncertain but the risks to their outlook changed enough to justify a move to support the economy. He added that there will be more action by each G7 nation along with the possibility of formal coordination. In other words, more easing is on the way from other central banks including the Fed if the sell-off in stocks deepens and the global slowdown worsens. This was aimed to restore confidence in the market, it did not.
The OECD indicated that economic growth could fall to as low as 1.5% for this year. The Fed’s decision could trigger a wave of easing from other central banks around the world although those in the euro-area and Japan have less scope to follow with rates already in negative territory.
The G7’s issued a statement that was to the point:
We, G7 Finance Ministers and Central Bank Governors, are closely monitoring the spread of the coronavirus disease 2019 (COVID-19) and its impact on markets and economic conditions.
Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks. Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase. G7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system.
We welcome that the International Monetary Fund, the World Bank, and other international financial institutions stand ready to help member countries address the human tragedy and economic challenge posed by COVID-19 through the use of their available instruments to the fullest extent possible.
But the point is, no rate cut, or government stimulus can cure the virus, which continues to spread with person to person transmission on the rise.
The latest WHO update says eight new Member States (Andorra, Jordan, Latvia, Morocco, Portugal, Saudi Arabia, Senegal, and Tunisia) reported cases of COVID-19 in the past 24 hours. Globally 90,870 cases have been confirmed (1,922 new), with China 80,304 confirmed (130 new) and 2,946 deaths (31 new). Outside of China 10,566 cases are confirmed (1,792 new) in 72 countries (8 new) with 166 deaths (38 new).
The flow on effects in terms of reduced commerce is significant, with more businesses unable to source raw materials or distribute good. Across transport and tourism, and education the impacts are immediate, but other sectors are following. Hence the expectation of slowing growth.
The question becomes, at what point do businesses cease to trade, or pay their employees, and to what extent will households also hunker down (many were already).
The US markets reacted badly to the FED’s move, with the Dow down close to 3%.
The ASX was also down in early trading.
The supply side consequences of the virus, could well flow on the credit markets, and in this case lower interest rates – other than as a confidence signal will not help.
Central bank tools are not going to cure the virus, and lower rates and more QE liquidity might well make the situation worse. Fiscal responses can provide a little more support, perhaps, though Governments seem reluctant to play that card hard.
We are in uncharted territory, and I do not think Central Banks can save us this time.
RBA Cuts, As Expected
At its meeting today, the Board decided to lower the cash rate by 25 basis points to 0.50 per cent. The Board took this decision to support the economy as it responds to the global coronavirus outbreak.
We suspect some banks will have difficulty in passing that cut through to mortgage holders, given the lower bounds problem. Westpac has however as first mover.
And the RBA only has one shot in the locker before QE starts.
The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected. Prior to the outbreak, there were signs that the slowdown in the global economy that started in 2018 was coming to an end. It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path. Policy measures have been announced in several countries, including China, which will help support growth. Inflation remains low almost everywhere and unemployment rates are at multi-decade lows in many countries.
Long-term government bond yields have fallen to record lows in many countries, including Australia. The Australian dollar has also depreciated further recently and is at its lowest level for many years. In most economies, including the United States, there is an expectation of further monetary stimulus over coming months. Financial markets have been volatile as market participants assess the risks associated with the coronavirus. Australia’s financial markets are operating effectively and the Bank will ensure that the Australian financial system has sufficient liquidity.
The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors. The uncertainty that it is creating is also likely to affect domestic spending. As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected. Given the evolving situation, it is difficult to predict how large and long-lasting the effect will be. Once the coronavirus is contained, the Australian economy is expected to return to an improving trend. This outlook is supported by the low level of interest rates, high levels of spending on infrastructure, the lower exchange rate, a positive outlook for the resources sector and expected recoveries in residential construction and household consumption. The Australian Government has also indicated that it will assist areas of the economy most affected by the coronavirus.
The unemployment rate increased in January to 5.3 per cent and has been around 5¼ per cent since April last year. Wages growth remains subdued and is not expected to pick up for some time. A gradual lift in wages growth would be a welcome development and is needed for inflation to be sustainably within the 2–3 per cent target range.
There are further signs of a pick-up in established housing markets, with prices rising in most markets, in some cases quite strongly. Mortgage loan commitments have also picked up, although demand for credit by investors remains subdued. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality. Credit conditions for small and medium-sized businesses remain tight.
The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target. The Board therefore judged that it was appropriate to ease monetary policy further to provide additional support to employment and economic activity. It will continue to monitor developments closely and to assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian
No “V-Shaped” Recovery Here – With Tarric Brooker [Podcast]
Another chat with Journalist Tarric Brooker covering finance and politics. Tarric uses the handle @AvidCommentator on Twitter.
We discuss the latest economic and political dynamics as the RBA considers a rate cut tomorrow, and central banks around the world seek to support their financial markets. How might this play out?
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Don’t Panic – Central Bankers Will Save Us! [Podcast]
We look at the latest reactions to recent market falls, ahead of the RBA’ decision tomorrow.
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No “V-Shaped” Recovery Here – With Tarric Brooker
Another chat with Journalist Tarric Brooker covering finance and politics. Tarric uses the handle @AvidCommentator on Twitter.
We discuss the latest economic and political dynamics as the RBA considers a rate cut tomorrow, and central banks around the world seek to support their financial markets. How might this play out?