With no surprises to market the Reserve Bank of Australia left its benchmark interest rate unrevised, as decelerating inflation and upcoming cuts in the government spending provide room for the RBA to support economic growth further. Glenn Stevens and the company maintained the overnight cash-rate at a record-low of 2.5%, meeting analysts' expectations. Moreover, policymakers reiterated their pledge to keep borrowing costs at the current level for a period of time. Improving labour market conditions as well as a pickup in the housing market are suggesting recent 2.25% cuts from late through August are spreading through the economy and help to avoid a growth gap caused by weaker investment in mining sector. Despite promising signs from various indicators, concerns about a tightening in government spending and the continued appreciation of the Aussie have forced the RBA to remain on the sidelines.
Investors and speculators have already wound back their expectations for a rate hike. Currently, markets are pricing in an 88% possibility of a 25 basis points rate hike over the next 12 months, while following this week's meeting the proportion of hawks plunged to 44%. Furthermore, investors lost their interest in monthly meetings, as the AUD/USD currency pair was seen trading just 0.09% higher around 0.9283 following the meeting.
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