Australia press: "Can RBA resist the markets' call for a cut?" via ForexLive

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An opinion piece in the weekend Australian press (Sydney Morning Herald) : Can RBA resist the markets' call for a cut?

In brief (the article is ungated if you want to read the whole thing):

On the Reserve Bank of Australia meeting on Tuesday (February 3) … “the chances are it will cut ”

  • it has one good reason … the drop in inflation (Q4 was 1.7% y/y)
  • … the core measure (trimmed mean) used by the Reserve at around 2.2 per cent was just within its target band
  • trimmed mean … the underlying rate was about 2.5% in Q3 … the trend is unmistakably, if not alarmingly, down… The market rate, that is taking out government enterprise charges, is only 1.6%, according to Roger Bridges, a rates and currency strategist at Nikko Asset Management Australia

Has anything else happened to nudge the Reserve since its last meeting two months ago?

  • GDP in the six months to the September quarter rose at an insipid annualised 1.6 to 2.2 per cent – depending on whether you use the seasonally adjusted or trend figure – and there's no reason to suppose this improved in the December quarter
  • terms of trade are plunging
  • confidence doesn't seem to have budged
  • And since there's a question mark over what's happening to jobs, better to be safe than sorry. Or in central bankthink, the decision of least regret is to cut.

But isn't the lower dollar helping? … If the Reserve resists the rate cut the market is expecting, … it could send the dollar up again … money is pouring out of Japan for better rate-yielding homes … Besides, the dollar is rising against currencies like the yen

  • The only argument against a cut is that it might fuel a property bubble … but the Reserve has had a quiet chat to the banks about advancing too many investment loans

I'll have more on the RBA ahead of Tuesday's decision (its gonna be hard to shut me up about it, TBH)

The Reserve Bank of Australia announcement is due at 0330GMT on Tuesday February 3

posted via ForexLive

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Posted In: FuturesForexGlobalEconomics
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