- Glenn Stevens, RBA Governor
Reserve Bank of Australia Governor Glenn Stevens explicitly said that the next monetary policy move is more likely to be an interest rate reduction than a hike. The South Pacific economy is undergoing a large growth transition out of mining boom, with monetary policy helping to rebalance the growth. Therefore, an accommodative stance is appropriate for some time yet, Stevens said. The RBA maintained rates on hold this week, indicating it may cut official cash rates further from the current all-time low of 2%.
Stevens welcomed the progress the Australian economy has already made in coping with the mining boom. Nevertheless, the Governor warned that Chinese economic growth was uncertain and presented a challenge for Australia's miners in an environment with lower demand for commodities. Financial markets are now pricing in a 32% chance of a rate cut in December, down from 70% before the central bank's decision to keep rates on hold. 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. The RBA will release its latest growth and inflation forecasts tomorrow in its statement on monetary policy.
© Dukascopy Bank SA