Hello RBA watchers … and happy anniversary!
One year ago today the RBA cut rates to 2.5%, we’re still there.
Since then:
- The RBA signaled an easing bias until December 2013
- In February 2014 it said “On present indications, the most prudent course is likely to be a period of stability in interest rates”, and it has repeated this line at the end of its statement ever since.
More recently:
- On July 3, RBA Governor Glenn Stevens said it would “probably be sensible for the board to cease references to a future ‘period of stability’ and and revert to the more normal formulation that the stable policy settings ‘remained appropriate’ or something like that.” This would simply be a recognition that a “period of stability” had occurred but wouldn’t imply any particular change in the bank’s views about the future course of policy
So, there may be a change in language coming up, maybe today. Not that a change in the target policy rate will necessarily follow soon – it looks like the cash rate stays at 2.5% for a good few months yet
Some recent analysts comments –
- Goldman Sachs are looking for a cut soon: “Aussie dollar tipped to force RBA interest rate cut”
- RBS is not looking for a cut soon: most likely outcome remains a long period of rates being on hold, but cuts appear most unlikely and we see potential for the RBA to begin lifting rates sooner than is currently priced in by the market.
- HSBC’s chief economist Paul Bloxham says a change “has the potential to shake up the market, so it is worth watching for this change”
- CBA think there is a risk that the RBA may be getting ready to change language (to drop the “period of stability”) though not yet
- Barclays (economist Kieran Davies) thinks the RBA will retain the period of stable rates language
- Westpac (chief economist Bill Evans) says the “period of stability” is likely to remain as the description of the policy outlook
On the AUD – these economists agree in their view that the RBA will continue to describe the exchange rate as high and as an hindrance in the economy’s rebalancing prospects … expecting a repeat of the line the “exchange rate remains high by historical standards, particularly given the declines in key commodity prices” or some such
–
Rereading all this … it looks like there isn’t gonna be much excitement from this announcement today (let’s hope I’m wrong). I’m not expecting too much. Rates unchanged, they’ll likely say the AUD is too high … and that’s about it.
