RBA unlikely to be swayed by shift in US rates outlook, to stay pat at Tuesday's meet

The spike in the Australian dollar that occurred as a result of weaker Greenback on account of poor US jobs numbers, however, does tend to highlight the tensions US monetary policy creates for other central banks. An Australian dollar that doesn’t reflect the impact of the collapse in commodity prices on the economy hampers and harms the ability of the non-resource sectors to grow.

That said, shifting outlook for US rates is unlikely to have any meaningful impact on the Reserve Bank Board’s decision making when it meets tomorrow. The central bank is expected to maintain official rates at 1.75 per cent rather than cutting to fresh lows. There is little prospect of further rate reductions in the next couple of months, particularly after the surprisingly strong March quarter GDP numbers.

"The economy is a long way from the much-feared recession and there is no sign of one on the horizon. Overall, our conclusion is that given the various cross-currents the RBA won’t be rushing into another rate cut in the months ahead, but will again cut later this year.’’ said AMP Capital chief economist Shane Oliver

The spike in the Australian dollar that occurred as a result of weaker Greenback on account of poor US jobs numbers, however, does tend to highlight the tensions US monetary policy creates for other central banks. An Australian dollar that doesn’t reflect the impact of the collapse in commodity prices on the economy hampers and harms the ability of the non-resource sectors to grow.

That said, the shifting outlook for US rates is unlikely to have any meaningful impact on the Reserve Bank Board’s decision making when it meets tomorrow. The central bank is expected to maintain official rates at 1.75 per cent rather than cutting to fresh lows. There is little prospect of further rate reductions in the next couple of months, particularly after the surprisingly strong March quarter GDP numbers.

"The economy is a long way from the much-feared recession and there is no sign of one on the horizon. Overall, our conclusion is that given the various cross-currents the RBA won’t be rushing into another rate cut in the months ahead, but will again cut later this year.’’ said AMP Capital chief economist Shane Oliver