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Australia's RBA stands pat on policy in September
September 1, 2015 / 5:21 AM / 2 years ago

Australia's RBA stands pat on policy in September

SYDNEY (Reuters) - Australia’s central bank held its cash rate steady at 2.0 percent on Tuesday in a widely expected decision and reiterated the need for an accomodative policy to support borrowing and lending.

A Reuters poll of 27 analysts had found all expected rates to stay unchanged this week, while markets <0#YIB:> had priced in almost no chance of a move.



* RBA holds its cash rate at 2 pct following cuts in May and


* Inflation forecast to remain consistent with the target over the the next one to two years

* Further softening in conditions in China and east Asia of late, but stronger US growth

* Monetary policy needs to be accommodative with low interest rates supporting borrowing and spending

* Text of the statement can be found on RBA01 or by double-clicking on

* The Reserve Bank's Web site is at:



”There was little to actually make of the decision. It’s more or less exactly the same as the previous month, you can’t really read too much into it. There’s no great new positives, no great new negatives.

”We did note that right at the top of the statement the Reserve Bank has noted that there has been a softening of conditions in China and East Asia, but having said that, they also said there’s been stronger US growth so that balances out the situation.

“We think interest rates are going to remain unchanged for the foreseeable future so we haven’t got a new call in terms of rates. We think for at least the next 12 months it will remain steady.”


”It’s a struggle to find any difference from the previous statement. They acknowledge volatility in the market, and some of the weak data out of China, but there’s little more than that.

”Beyond that he policy conclusion and their comments on the currency look to be pretty much identical (from the previous statement) the message in that is that rates will stay on hold.

”They had the opportunity to put in a slightly more dovish slant if they wanted to given what’s happened in the last few weeks, but suggests they’re not seeing too much of an impact from those developments as of yet.

”We think we’ll stay at the current 2 percent, and into next year as well.

“Certainly they still have scope to act if they need to but if the economy unfolds as they expect it to I don’t think we’ll see anything more from them this cycle.”


“The market was positioning for a bit of a dovish tilt, and I don’t think they really got it. As far as the RBA ended up taking it was looking at the Federal Reserve. And rather than saying they were going to increase the policy rate later this year, they’ve left it a bit open ended to say ”the period ahead“. ”With respect to China and equity market volatility, they’ve mentioned it, but they haven’t really gone into much more detail as well. So I think net-net overall the statement probably disappointed the doves.

“Our forecast is (unchanged) for the RBA to keep the cash rate at 2 percent for this year and out to next year as well. We’ve got a cash rate hike priced in for Q4 next year.” TOM KENNEDY, ECONOMIST, JPMORGAN

”No major changes in the statement. The major alteration by the RBA is the acknowledgement of equity market volatility, that was pretty much expected. They haven’t really drawn any conclusions from that at this stage.

”I wouldn’t say there is a very obvious dovish tilt in there, they do acknowledge a few developments in China...

“We’ve got the RBA on hold for about the next year. They are likely to start raising from the final quarter of 2016 and that’s on the back of an improving global backdrop and a firmer domestic demand.”


”The main surprise is that despite all the volatility in financial markets over the last few weeks and the heightened worries over China, there is not more reference to that.

“You could argue there a degree of dovishness given the reference to the ‘economy operating at spare capacity for some time’, but if the RBA does have a dovish bias, it is very mild one and there has been no change since the last meeting.”


”There’s not really that much in it - 2 percent as universally expected. The key conclusion around currency is still the same. It’s acknowledging there’s been a softening in conditions and commodity prices are lower.

”There’s very little assessment of risk or implication for Australia. Given the main developments in the past month have been international developments they had to say something but it’s largely a statement of fact.

”We still have two cuts in our profile, one towards the end of 2015 and another in mid-2016 which takes cash to 1.5 percent. We still think there is a good chance the cash rate moves sub-2 percent driven by some of the factors the RBA has talked today transmitting through the economy – weak China, lower commodity prices and weaker capex.


The Australian dollar AUD=D4 was a touch firmer at $0.7137, from an overnight low of $0.7082. It touched a 6-1/2-year trough of $0.7044 last week. Interbank futures <0#YIB:> eased a little, having already priced in a 25-basis point-cut by early next year.


- A Reuters poll of 27 analysts had found all expected a steady outcome this week. Markets still imply a three-in-four chance of a quarter point easing for this year. AU/INT

- Core inflation is well contained in the RBA’s target band of 2 to 3 pct, allowing the bank to keep the door open to a further cut if needed.

- The economy is struggling with a prolonged downturn in mining investment and a disappointing reluctance by other sectors to pick up the slack.

- Falling prices for major commodity exports have also hit company profits, national income and government tax revenues, eating into nominal GDP growth.

- Record low rates have fueled a much-needed boom in home building but are also driving speculative increases in house prices, particularly in Sydney.

Reporting by Ian Chua

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