RBA: another rate cut is not off the table - Commerzbank

Elisabeth Andreae, analyst at Commerzbank notes that even though the RBA would like to wait for further data, another rate cut is not off the table. The AUD, which has appreciated considerably since the start of the year, plays an important role in this regard.

Key Quotes

“Like in early September, the Reserve Bank of Australia (RBA) should decide not to cut rates at its meeting. With Q2 GDP data having come in solid, the RBA will now wait for Q3 inflation data, which is due for release in late October. But another rate cut is not off the table, because risks to the outlook remain high despite recent signs of a cautious recovery of commodities prices. Especially the weak investment and persistently low inflation suggest that the RBA still tends towards further easing.” 

“The AUD, which has appreciated considerably since the start of the year, plays an important role in this regard. It is to be assumed that the exchange rate was a factor also in the decision to lower the key rate in August. After all, the appreciating AUD not only dampens inflation but also hampers the necessary adjustment of the economy away from mining, which the RBA wants to support with its lax monetary policy. As long as the AUD’s appreciation trend continues unbroken, the RBA therefore remains on alert.”