In the minutes for the RBA’s July meeting, at which they elected to keep interest rates at 1.75%, the members noted that although financial markets had been volatile around the time of the vote, “market functioning had been resilient” in the time since.
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Traders point to the slowing of Consumer-price index to a 1.1 percent in the first quarter, as revealed in the median forecast of economists surveyed by Bloomberg.
Money market pricing suggests the chances have now risen to 60%, the catalyst being publication yesterday of the minutes from the bank’s previous meeting on July 5.
Information on inflationary pressures and the labor and housing markets “would allow the board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate”, the central bank said.
Better-than-expected Chinese growth data released on Friday also bolstered the appeal of the Australian Dollar as China is one of Australia’s most important trade partners. The RBA Governor Glenn Stevens had already warned that the appreciating exchange rate could be a dampener to the economy’s transition from mining to investment.
The New Zealand Dollar plummeted last week after the Reserve Bank of New Zealand (RBNZ) announced that it would suddenly be making a statement on the nation’s economy ahead of its August policy decision.
The Reserve Bank of India (RBI) is expected to slash key interest rates by 25 basis points in its upcoming August 9 policy review meet, if pulses price inflation comes down on account of good weather, said Bank of America Merrill Lynch (BofA-ML) in a report. As he or she will be under tremendous pressure from the Government, industry and bankers to go soft on interest rates, he can not be a hawkish on interest rates in the Indian economy. “This should pull down pulses prices by 20 per cent and cool CPI inflation to 5.1 per cent by March”, BofA-ML said in a research note.
Inflation below expectations be a significant drag on the Australian dollar, NAB said, adding that the data “will be paramount for market expectations of another 25 basis points rate cut”.
Underlying inflation is at its lowest level in more than two decades, despite recent above-trend growth.
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The market is taking a similar view as by 1005 local time the Aussie dollar had fallen to 75.66 US cents in anticipation of the RBA’s meeting minutes.
