- Glenn Stevens, RBA Governor
The Reserve Bank of Australia refrained from slashing the official cash rate amid signs of an upswing in business morale, but signalled that subdued inflation gives scope to cut rates if needed. The RBA kept the benchmark rate at a record-low 2.0% for a sixth consecutive month. Financial markets are now pricing in a 32% chance of a rate cut in December, down from 70% before the central bank's decision. Prospects of more official interest rate cuts remain on the table given the RBA's determination to keep downward pressure on the Aussie Dollar, which is helping boost the competitiveness of exporters. Moreover, any delay in the Fed's decision to hike rates may force the RBA to deliver additional cuts to the official cash rate.
Tentative signs of a recovery in non-mining business spending signals the most accommodative monetary policy settings on record are providing sufficient support to help the Australian economy shift away from a reliance on resources investment. Australia's economy expanded 0.2% in the June quarter, or 2.0% on an annual basis. The RBA's year-end forecast for GDP growth this year is 2.5% and 2.5%-3.5% for the year-ending December 2016.
© Dukascopy Bank SA