Daily Commentary BY THE CURVE TEAM –

RBA Leave Rates on Hold and Sustain Easing Bias

6th of November, 2019

The RBA left the cash rate unchanged yesterday at 0.75% and retained their easing bias.

As was widely expected by the market the RBA make no change to monetary policy at yesterday’s board meeting. Governor Lowe’s statement accompanying the announcement touched on many of the key themes of late.

They retained their gentle turning point rhetoric and central outlook:

“The outlook for the Australian economy is little changed from three months ago. After a soft patch in the second half of last year, a gentle turning point appears to have been reached. The central scenario is for the Australian economy to grow by around 2¼ per cent this year and then for growth gradually to pick up to around 3 per cent in 2021.”

Whilst the tone of the statement as a whole was tilted to the positive side, they left open the possibility of further cuts over the coming months:

Given global developments and the evidence of the spare capacity in the Australian economy, it is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target. The Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.”

Additionally, despite expectations of an update to the framework agreement between the RBA and the government a release yesterday did not eventuate. It is still likely we will see that update prior to the release of the Quarterly Statement on Monetary Policy due Friday. Given the tone of yesterday’s statement it is now unlikely we will see any major changes to their forecasts and may actually see positive adjustments.

Matthew Dunshea

Client Relationship Manager