RBA keeps rate on hold, bets mounting of rate cut next year

Source: Dukascopy Bank SA
"Today's official PMI reading points to continued downward pressure on manufacturing activity"
- Julian Evans-Pritchard, China analyst at Capital Economics


The Reserve Bank of Australia kept its interest rates unchanged at ultra-low level in an attempt to support the economy, which is hit by strong local currency and plunging export prices.  Australia's central bank maintained the official cash rate at 2.5% for 16 consecutive months, with economists being split on the RBA's next move. Bets are mounting that slowdown in the Australian and global economy could prompt the RBA to cut interest rates over the next 12 months. The RBA kept rates unchanged to urge domestic companies to invest as 11-year high jobless rate and weak wages subdue inflation. Moreover, a slowdown in China, Australia's top trading partner, worsened in October as industrial activity growth and fixed-asset investment trailed estimates. The RBA estimated that economic growth would probably remain subdued until the middle of 2015 and the jobless rate of 6.2% was unlikely to fall in a sustained manner for some time. It also noted that Japan's expansion of quantitative easing may spur flows that would support the Australian Dollar.

Meanwhile, the number of building permits in Australia jumped 11.4% in October, as local councils gave the green light to the construction of 17,062 new homes. In September, approvals dropped by 11.2%. On an annual basis, building approvals rose 2.5%, the Australian Bureau of Statistics reported.


© Dukascopy Bank SA

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