Reserve Bank of Australia keeps cash rate at 1.5%

03 August, 2017, 00:15 | Author: Regina Lloyd
  • Weekly NZDUSD

SYDNEY-Australia's central bank on Tuesday ramped up its warnings over recent strength in the Australian dollar saying it is becoming a potential brake on economic growth and prices. Moreover, Lowe actually said in his statement the terms of trade are expected to decline "over the period ahead". "But, for now, policy still seems set to remain on hold", said Lloyds Commercial Banking's, chief economist, Rhys Herbert, who forecasts a 6-2 split in favour of keeping interest rates unchanged.

Dr Oliver said if this happens it will be good for the Australian share market but there may be a further rise in the Australian dollar due to the US Federal Reserve's likely reluctance to raise its interest rate further.

The Bank of England (BOE) rate meeting is the main release for the Pound in the week ahead.

'The Australian dollar has appreciated recently, partly reflecting a lower U.S. dollar'.

There had been speculation in the mainstream media that interest rates would need to rise sooner rather than later, particularly as house prices in Sydney, Melbourne and Canberra posted double-digit growth year-on-year, according to the CoreLogic Hedonic Home Value Index.

Finally, CACIB notes that the USD's recent downtrend remains the key theme in the FX markets and price swings around the trend will remain the key source of FX volatility. Lowe said that growth in housing debt has been beating the sluggish climb in household incomes.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 2.72 percent, the yield on 15-year note flat at 3.02 percent and the yield on short-term 2-year traded almost 1 basis point lower at 1.81 percent by 03:50 GMT.

"Retail sales have picked up recently, but slow growth in real wages and high levels of household debt are likely to constrain growth in spending", he said.

One bright spot for the economy is the prospect of recovery in business investment spending. Both CPI inflation and measures of underlying inflation are running at a little under 2 per cent. Inflation is expected to pick up gradually as the economy strengthens.

They're expected to show continued solid jobs growth in the USA with 180,000 new jobs created in July and a fall in the unemployment rate, coupled with subdued wages growth. A factor working in the other direction is increased competition from new entrants in the retail industry.

"Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time", the bank said.



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