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8 May 2013
Forex Flash: Expect another RBA cut in June or July - Nomura
FXstreet.com (Barcelona) - The RBA cut its rate by 25bp to 2.75%, saying “the Board decided to use some of that scope (to ease further). It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target."
According to Nomura economists Charles St-Arnaud and Martin Whetton, "the cut came sooner that we had expected, with the accompanying statement not overly dovish and did not signal a dramatic change in the way the RBA views the economy."
They add that concerns over the strong AUD seem to have risen, the RBA noted. Overall, Charles and Martin see yesterday's cut "as an effort to strengthen demand from the non-resource sector by reducing the high savings rate, which had lowered the neutral policy rate in recent years. The reduction in policy rates also seems aimed at mitigating some of the impact of the non-fundamentals-supported strength of AUD on the economy, in our view."
They add: "Given the language used, in which the RBA acknowledges the room it has to cut rates, saying that “the Board decided to use some of that scope” today, suggests that a further cut should not be discounted. This would be consistent with past RBA behaviour, as it has often changed its policy rate with a pair of rate changes. As such, we now believe that another cut could likely come at the June or July meeting.
According to Nomura economists Charles St-Arnaud and Martin Whetton, "the cut came sooner that we had expected, with the accompanying statement not overly dovish and did not signal a dramatic change in the way the RBA views the economy."
They add that concerns over the strong AUD seem to have risen, the RBA noted. Overall, Charles and Martin see yesterday's cut "as an effort to strengthen demand from the non-resource sector by reducing the high savings rate, which had lowered the neutral policy rate in recent years. The reduction in policy rates also seems aimed at mitigating some of the impact of the non-fundamentals-supported strength of AUD on the economy, in our view."
They add: "Given the language used, in which the RBA acknowledges the room it has to cut rates, saying that “the Board decided to use some of that scope” today, suggests that a further cut should not be discounted. This would be consistent with past RBA behaviour, as it has often changed its policy rate with a pair of rate changes. As such, we now believe that another cut could likely come at the June or July meeting.