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3 Nov 2015
RBA: Nearly 50% likelihood of a 25bp rate cut - RBS
FXStreet (Bali) - Brian Daingerfield, FX Trading Strategist at RBS, notes that interest rate markets suggest a nearly 50% likelihood of a 25bp interest rate cut at the Reserve Bank of Australia meeting.
Key Quotes
"That appears appropriate in our view, where our base case is the RBA opts not to trim the benchmark rate, but the risks of a 25bp interest rate cut are nevertheless high."
"The November decision will be taken alongside the RBA’s first Monetary Policy Statement and forecast update since China introduced its new currency policy in August."
"While risks around China have certainly increased over the past three months, RBA officials have given few concrete signs that they are prepared to change their generally positive outlook on growth and inflation this week."
"Still, the RBA’s concern over encouraging a build-up in housing market imbalances has likely fallen. Previously-introduced APRA macro prudential measures have made an impact – several private banks have tightened lending standards recently, and growth in mortgage loans for investment has slowed markedly. Third-quarter CPI also fell."
"Both measures of core inflation, however, held within the RBA’s target range. If the RBA does not reduce rates, we see a risk that a renewed easing bias is introduced. That leaves us looking to sell any rally in AUD/USD."
Key Quotes
"That appears appropriate in our view, where our base case is the RBA opts not to trim the benchmark rate, but the risks of a 25bp interest rate cut are nevertheless high."
"The November decision will be taken alongside the RBA’s first Monetary Policy Statement and forecast update since China introduced its new currency policy in August."
"While risks around China have certainly increased over the past three months, RBA officials have given few concrete signs that they are prepared to change their generally positive outlook on growth and inflation this week."
"Still, the RBA’s concern over encouraging a build-up in housing market imbalances has likely fallen. Previously-introduced APRA macro prudential measures have made an impact – several private banks have tightened lending standards recently, and growth in mortgage loans for investment has slowed markedly. Third-quarter CPI also fell."
"Both measures of core inflation, however, held within the RBA’s target range. If the RBA does not reduce rates, we see a risk that a renewed easing bias is introduced. That leaves us looking to sell any rally in AUD/USD."