Reserve Bank of Australia (RBA): In no rush – TDS

Analysts at TD Securities (TDS) expect the Reserve Bank of Australia (RBA) is unlikely to hike interest rates further, though still see the possibility of an insurance hike in November. Earlier this Tuesday, the Australian central bank decided to stick to the wait-and-see stance and left its benchmark interest rate unchanged for the third straight month.

Key Quotes:

“The RBA kept the cash rate on hold at 4.10% as was widely anticipated by the analyst and trading community. Of more interest for markets was the tone of the Bank's commentary, in particular the last paragraph. As we expected, the Bank reiterated its conditional tightening bias."

“Despite the conditional tightening bias, our sense was that it was diluted at the margin. While the Bank continues to focus on assessing the lagged impact of rate hikes delivered so far, we read a touch more emphasis on downside risks regarding the uncertainty around the economic outlook.”

“On the labour market, it's no longer 'very tight', but 'tight'. On growth the Bank reiterated its outlook for growth to be sub-trend, but based on data so far 'growth has slowed'. Further, the Bank referred to increased uncertainty around the Chinese economy as a factor weighing on the outlook.”

“Our read is the RBA will continue to assess the outlook for the cash rate meeting by meeting, but we don't see the RBA in a rush to hike. We retain our call for no further RBA hikes but don't rule out the possibility of an insurance hike in November after Q3 CPI is released in late October, or should inflation offshore resume its trek higher.”