RBA added there is still scope to reduce the benchmark interest rate should outlook worsen significantly. The extent of RBA concern surrounding China appears to have worsened, while the potential for an October rate cut is very much on the cards.
According to RBA, previous rate cuts are still working through economy.
The central bank's models suggest A$ somewhat overvalued, but not substantially, which makes the prospects of any intervention unlikely.
NAB notes that "the local money market has raised its implied probability of an October quarter-point rate cut to 45% from about 35% at the start of Monday’s trade."
However, as IFR analyst Amand Tan notes, "financial markets are not that certain of a move as soon as October partly because there is little in terms of key AU data prior to the 2 Oct meeting (hence a November/December rate move could be considered safer)." There is, nonetheless, an argument for an additional rate cut in Oct as Aus domestic sentiment remains weak and recent indicators suggest that the Australian economy is struggling.