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3 Nov 2015
RBA maintains status quo – Deutsche Bank
FXStreet (Delhi) – Adam Boyton, Chief Economist at Deutsche Bank, notes that the RBA has kept its cash rate unchanged at 2% while the statement suggests that “the Board judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting.
Key Quotes
“Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand”
“Put simply – and as we noted after the CPI – the low inflation print gave the Bank scope to ease policy if they wanted. The real question was always whether or not they needed to. Here it appears that the Bank is seeing some of the same things we are, such as: the stability in the unemployment rate over the past year; and the lift in business conditions.”
“Indeed the Statement notes that: “business surveys suggest a gradual improvement in conditions over the past year. This has been accompanied by somewhat stronger growth in employment and a steady rate of unemployment”. This pick-up in activity has been reflected in the phrase in the final paragraph “the prospects for an improvement in economic conditions had firmed a little over recent months”.”
“Elsewhere, the Bank appears ‘relaxed’ about the level of the AUD: “The Australian dollar is adjusting to the significant declines in key commodity prices”, with the ‘jawboning’ seen earlier in the year absent.”
“We argued in our RBA preview on Friday that: the pick-up in the labour market and business conditions; combined with the risk that a rate cut now might re-stoke the fire that had been evident in the Sydney property market, argued in favour of no change at this coming meeting.”
“Given today’s statement from the RBA, it appears that getting a rate cut over the next three or so months relies on a turn lower across the activity side of the economy (i.e. labour market / business conditions) and a further cooling house in house price growth across Sydney and Melbourne. On balance we expect the labour market to remain robust and hence continue to see the RBA cash rate at 2.00% for some time.”
Key Quotes
“Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand”
“Put simply – and as we noted after the CPI – the low inflation print gave the Bank scope to ease policy if they wanted. The real question was always whether or not they needed to. Here it appears that the Bank is seeing some of the same things we are, such as: the stability in the unemployment rate over the past year; and the lift in business conditions.”
“Indeed the Statement notes that: “business surveys suggest a gradual improvement in conditions over the past year. This has been accompanied by somewhat stronger growth in employment and a steady rate of unemployment”. This pick-up in activity has been reflected in the phrase in the final paragraph “the prospects for an improvement in economic conditions had firmed a little over recent months”.”
“Elsewhere, the Bank appears ‘relaxed’ about the level of the AUD: “The Australian dollar is adjusting to the significant declines in key commodity prices”, with the ‘jawboning’ seen earlier in the year absent.”
“We argued in our RBA preview on Friday that: the pick-up in the labour market and business conditions; combined with the risk that a rate cut now might re-stoke the fire that had been evident in the Sydney property market, argued in favour of no change at this coming meeting.”
“Given today’s statement from the RBA, it appears that getting a rate cut over the next three or so months relies on a turn lower across the activity side of the economy (i.e. labour market / business conditions) and a further cooling house in house price growth across Sydney and Melbourne. On balance we expect the labour market to remain robust and hence continue to see the RBA cash rate at 2.00% for some time.”