3 Nov 2015
At today’s meeting, the RBA decided to leave the cash rate unchanged at 2.00%, following the same decision at the last meeting. Post the announcement, shares moved higher and the Australian dollar fell.
The statement from the RBA, whilst little unchanged from the previous statement, had a more positive tone on current conditions in the Australian economy. The statement was also more spaced out in some sections, placing emphasis on current and expected inflation and movements in asset markets. Although inflation was singled out, the comments were relatively benign.
Some changes from the previous statement included references to the stabilising of volatility in financial markets more recently and the increase in credit costs for some emerging market countries. The RBA also indicated that recent business surveys had turned positive and that they were fairly comfortable with the stronger growth in employment and the steady rate of unemployment.
The RBA reiterated the steadying of growth in lending to the housing market more recently, and explained that supervisory measures are helping to contain risks in the housing market. They also reiterated their stance that accommodative monetary policy is still required. The RBA ended the statement with guidance that any changes to the cash rate ahead will be data dependent, not wanting to indicate their bias prior to the next meeting, but maintaining that accommodative policy remains appropriate and that they remain ready to ease further if needed.
We suspect the RBA is keeping their powder dry for next year, where there’s the potential for economic conditions to come under strain in light of the slowdown in China and the mining sector.
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