If you’re expecting some excitement from Philip Lowe’s first monetary policy meeting as RBA governor next week, you’ll be disappointed, says TD Securities.
Prashant Newnaha, rates strategist at TD, explains:
TD and market opinion is unanimous for the RBA to keep the cash rate on hold at 1.50% at next week’s October Board Meeting. We expect little change in the statement. The RBA has now run with virtually an identical statement for the last 3 meetings, one that even included the RBA cutting in August.
Newnaha believes that it’ll be “cut and paste” statement, three words that may encourage some Australians to turn the long weekend into a four-day break, no doubt.
He suggests that the next truly “live” meeting for a rate change will be in November, following the release of the September quarter CPI report on October 26. Even then, he doesn’t expect that rates will move.
“A November rate cut is highly contingent on a Q3 CPI miss,” he says. “We cannot recount a period that the RBA has cut rates after 3 successive CPI prints.”
In terms of the RBA’s November meeting, only 8 of 25 economists surveyed by Bloomberg expect the cash rate to be reduced to 1.25%.
Financial markets share a similar view, attaching a one-in-four chance that that 25 basis point cut will be delivered.
Newnaha is of the view that the RBA’s easing cycle — having delivered 300 basis points of cuts since late 2011 — is now over.
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