RBA to stand pat on rates next week - Commerzbank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Oct 30, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Córdoba) - Elisabeth Andreae, analyst at Commerzbank notes that they expect the Reserve Bank of Australia to maintain rate on hold at 2% next week and wait for the investment report, despite last week’s soft inflation data.

    Key Quotes

    “RBA (Reserve Bank of Australia) Wednesday’s data on inflation in Australia turned out considerably lower than expected, fuelling speculation about an imminent rate cut by the RBA, especially with economic data having come in rather mixed recently. Investment is falling due to the collapse of commodities prices, and unused capacity is dampening the price pressure”.

    “In addition, there are the risks in China and the concern that the strongest “El Niño” in 18 years will lead to a great drought, with negative effects above all on the agricultural sector. This has probably dampened the RBA’s confidence as to the gradual recovery in the sectors outside mining”.

    “However, we expect the central bank to keep its interest rate powder dry next week – i.e. leave its key rate on hold at 2% – and wait for the investment report, which is due out in late November”.

    “The weaker AUD is an important pillar of the recovery. At the same time, it will probably lead to higher price pressure medium-term via rising import prices. The Fed’s latest comments have strengthened the prospect of a US rate hike in December, and this should weaken the AUD. The RBA will keep an eye on this in the coming months”.
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