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Australia: Still got room – ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 1, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    James Knightley, Senior Economist at ING, notes that the Reserve Bank of Australia left monetary policy unchanged, but suggested that should demand soften they have scope to loosen monetary policy further.

    Key Quotes

    “The RBA left the cash rate unchanged at 2% earlier today and emphasised that while the commodity based part of the Australian economy continues to struggle, the non-resource sector is performing well. This is clearly evident in the jobs market. Nonetheless there is concern about financial market volatility and external demand, but the RBA is of the view that there are “reasonable prospects for continued growth in the economy, with inflation close to target.”

    It was also interesting to see no further active efforts to talk down the Australian dollar, merely an acknowledgment that “the exchange rate has been adjusting to the evolving economic outlook”. Still, the RBA could yet come in with more stimulus given that “low inflation could provide scope for easier policy, should that be appropriate to lend support to demand”. On balance, we don’t think it will be required and forecast stable rates through to mid 2017. Nonetheless this requires the Chinese stimulus efforts to start generating a more positive outlook on demand.”
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