In a note out this morning, HSBC Australia & New Zealand chief economist Paul Bloxham explains why Australia’s central bank will keep the cash rate on hold at its meeting next week.
- Since the last board meeting the AUD has depreciated by 5% in trade-weighted terms, loosening monetary conditions
- The lower AUD should help support Australia’s great rebalancing act, as it takes some pressure off exchange rate-sensitive industries
- With financial conditions loosening and rebalancing already progressing, we expect the RBA to remain on hold
The last time it met, the cash rate was cut to a record low of 2.75%, which HSBC thinks was the result of the stubbornly-high Australian dollar.