RBA: Rate cuts not on the horizon just yet – TDS
FXStreet (Bali) – Prash Newnaha, FX Strategist at TD Securities, notes that he is a little surprised at Thursday’s excessive dovish interpretation to RBA Governor Stevens speech.
“The Gov does not provide any indication that rate cuts are on the cards. What perhaps got the market’s attention was his comment that “we still have ‘ammunition’ on interest rates”, a comment that is possibly as close to the Fed’s ‘bazooka’ should it need to be deployed.”
:While this comment received a fair number of headlines, a closer read of the speech shows that the RBA believes “…the stance of monetary policy is very accommodative..”.
“He also ruled out the prospects of an imminent rate cut too as “the full effects of the very accommodative stance of policy have not been seen at this stage”.”
“Reading those comments, suggests that rate cuts are not on the horizon just yet. In fact the RBA states “The Banks forecasts from early May, which we have not materially changed, embody ongoing growth, but in the near term, probably a bit below trend”.”
“Indeed the outlook is evolving closely with the May SoMP forecasts. In addition, the RBA reiterated that “we are seeing some encouraging early signs of the ‘rebalancing’ taking place”, “but these signs remain early ones. There is quite some way to go yet before the episode is completed”.”
For more information, read our latest forex news.