RBA minutes: Rate cut prospects on assumption of bad global outcomes receding

FXstreet.com (Barcelona) - Following yesterday's speech at the Credit Suisse Asian investment Forum, Governor Glenn Steven provided no additional clues in terms of where interest rates may be headed 'down under'.

With today's RBA minutes, we get confirmation that the picture remains unclear, yet some mild optimism that the RBA will cotninue on hold appears to be on the rise. This is currently being reflected on the AUD/USD rate, currently at session highs at 1.0611 from 1.0595 lows earlier.

The probability of a very bad outcome in the near future, especially coming from Europe, had receded a little further, the RBA mentioned; assuming this is the supposition that has created much of the rumour on a potential rate cut going forward, these comments should come as a relief to at least see the RBA holding off the fire for the months to come.

With regards to inflation, the RBA commented: "In underlying terms was around the midpoint of the target range and was expected to remain within the target range over the forecast horizon. Members observed that this forecast was reliant on some improvement in productivity growth to hold down domestic cost pressures."

The minutes added: "On balance, the Board considered that it was appropriate for interest rates to be around their average levels, which was judged to be the case at present. The Board would continue to monitor both how the global economy evolved and the course of domestic economic activity and prices."

"The RBA remains quite bullish on the medium term prospects for the Australian economy so any rate cuts will probably be due to global factors. China looks set for a soft landing, the US economy is picking up and Europe seems somehow to be muddling through its problems meaning that global reasons for a rate cut are receding" says Sean Lee, analyst at Forexlive.

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