Australian Dollar Climbs as RBA Rate Cut Bets Fade

While the RBA is expected to keep the benchmark interest rate on hold at two per cent, there is concern about the central bank’s outlook on the Australian economy. 0 per cents on Tuesday for a fifth upright month in a extensively estimated selection since it hesitated to evaluate the effectiveness of past easings.

IG markets analyst Angus Nicholson said the market expects the rate to be left unchanged but investors were nervous about the central bank’s outlook on the local economy which may indicate a future rate cut.

“The RBA governor will be very happy that the lower Australian dollar is talking a few of the pressure off interest rates, and other sectors of the economy can afford to pick-up, rather than just housing”, TD Securities economist Annette Beacher said.

At the same time, we have experienced stronger growth in employment and a steady unemployment rate.

The RBA has kept the official cash rate on hold again.

The global economy is expanding at a moderate pace, with a few further softening in conditions in China and east Asia of late, but stronger United States growth. The RBA’s monetary policy is “appropriately accommodative and could be eased further if the cyclical rebound disappoints, provided financial risks remain contained”, IMF executive directors said in a Sept 30 statement.

The Board today judged that leaving the cash rate unchanged was appropriate at this meeting. According to the Business Spectator this morning, the market was pricing in a mere 7 per cent chance of an interest rate cut today, so there certainly weren’t any surprises. Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.

He said growth in mortgage loans had been steady over recent months, and housing prices continued to rise strongly in Sydney and Melbourne, although the trends were varied in the nation’s other major cities.