23 Feb 2016
Can the RBA hold off? - Rabobank
Analysts at Rabobank explained that bolstering the outlook for the AUD has been the perception that the Australian economy is sufficiently robust for the RBA to avoid another rate cut this year.
Key Quotes:
"At its February 2 policy meeting, the RBA stated that “surveys of business conditions moved to above average levels, employment growth picked up and the unemployment rate declined in the second half of the year, even though measured GDP growth was below average.
The pace of lending to businesses also picked up”. On the back of this relatively positive assessment, the RBA “judged that there were reasonable prospects for continued growth in the economy, with inflation close to target”.
The sharp falls in the value of Australia’s effective exchange rate since 2013 will have contributed to the loosening in monetary conditions in Australia.
Ironically, any sustained pick-up in the value of the AUD will likely temper this optimism and, given the low inflation backdrop, increase the risks that the RBA will restart its rate cutting cycle. We expect that headwinds coming from China will ensure that the risk of further easing remains on the cards this year."
Key Quotes:
"At its February 2 policy meeting, the RBA stated that “surveys of business conditions moved to above average levels, employment growth picked up and the unemployment rate declined in the second half of the year, even though measured GDP growth was below average.
The pace of lending to businesses also picked up”. On the back of this relatively positive assessment, the RBA “judged that there were reasonable prospects for continued growth in the economy, with inflation close to target”.
The sharp falls in the value of Australia’s effective exchange rate since 2013 will have contributed to the loosening in monetary conditions in Australia.
Ironically, any sustained pick-up in the value of the AUD will likely temper this optimism and, given the low inflation backdrop, increase the risks that the RBA will restart its rate cutting cycle. We expect that headwinds coming from China will ensure that the risk of further easing remains on the cards this year."