6 Apr 2015
Chance of a rate cut by the RBA tomorrow – Rabobank
FXStreet (Edinburgh) - In the view of Michael Every, Strategist at Rabobank, there is still the possibility that the RBA lower its repo rate in its meeting tomorrow.
Key Quotes
“I continue to argue that the more dovish the Fed are, the more dovish the RBA need to be too; not out of any pressure to follow the US policy lead per se, but because Fed dovishness means less USD appreciation, and so less chance to push AUD down”.
“As such, the latest shift lower in the Fed’s implied path of rate hikes, and Janet Yellen then suggesting US policy tightening will be both ‘slow and low’, and could even be reversed if needed, means that the RBA will need to loosen policy even more; that’s especially the case given China continues to slow too, a fact that has dragged iron ore futures down 12% since their February meeting”.
“So on balance, a 25bps cut in April makes slightly more sense than a further delay to me – but that doesn’t mean we will get one, as lower Aussie rates have made sense to me for ages and the RBA has only delivered a meagre 25bps so far”.
Key Quotes
“I continue to argue that the more dovish the Fed are, the more dovish the RBA need to be too; not out of any pressure to follow the US policy lead per se, but because Fed dovishness means less USD appreciation, and so less chance to push AUD down”.
“As such, the latest shift lower in the Fed’s implied path of rate hikes, and Janet Yellen then suggesting US policy tightening will be both ‘slow and low’, and could even be reversed if needed, means that the RBA will need to loosen policy even more; that’s especially the case given China continues to slow too, a fact that has dragged iron ore futures down 12% since their February meeting”.
“So on balance, a 25bps cut in April makes slightly more sense than a further delay to me – but that doesn’t mean we will get one, as lower Aussie rates have made sense to me for ages and the RBA has only delivered a meagre 25bps so far”.