Despite expectations of another rate cut, the Reserve Bank of Australia took financial markets by surprise by sitting tight at its meeting yesterday. Today’s GDP print keeps the rate outlook murky.
It Was and Remains a Close Call
Despite consensus expectations of a rate cut, the Reserve Bank of Australia (RBA) held its ground at its policy meeting yesterday, and today’s slightly weaker-than-expected GDP print confirm the RBA’s expectation that the Aussie economy is “operating with a degree of spare capacity.” Our official call was “no cut” but admittedly it was a close call for us. We suspect that many other RBA-watchers were similarly torn. The Bloomberg consensus showed 11 economists anticipating no change in the cash rate and 18 favoring a 25 basis point rate cut. Even in its official statement, the RBA conveyed an unwillingness to make a long-term commitment with respect to the direction of rates saying “it was appropriate to hold interest rates steady for the time being… [f]urther easing of policy may be appropriate over the period ahead.” Another rate cut is likely in the cards this year but not until it is justified by a substantial decline in inflation or the growth outlook.
It Was and Remains a Close Call
Despite consensus expectations of a rate cut, the Reserve Bank of Australia (RBA) held its ground at its policy meeting yesterday, and today’s slightly weaker-than-expected GDP print confirm the RBA’s expectation that the Aussie economy is “operating with a degree of spare capacity.” Our official call was “no cut” but admittedly it was a close call for us. We suspect that many other RBA-watchers were similarly torn. The Bloomberg consensus showed 11 economists anticipating no change in the cash rate and 18 favoring a 25 basis point rate cut. Even in its official statement, the RBA conveyed an unwillingness to make a long-term commitment with respect to the direction of rates saying “it was appropriate to hold interest rates steady for the time being… [f]urther easing of policy may be appropriate over the period ahead.” Another rate cut is likely in the cards this year but not until it is justified by a substantial decline in inflation or the growth outlook.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.