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With the exception of a few kind words directed at Glenn Stevens, for whom the Reserve Bank of Australia’s (RBA) last meeting was his last as central bank governor, the meeting minutes contained little of interest. Generally, the RBA sounded relatively optimistic in view of robust growth and a recovery of commodity prices.
There were no clear references to further rate steps. As the economic situation has not changed significantly since then that suggests that the RBA will leave rates unchanged at its next meeting in early October.
A further rate cut this year is not off the agenda yet, though. The RBA is likely to wait for the inflation data for Q3 which will only be published after the meeting.
Should inflation remain at low levels the RBA is likely to perceive the AUD appreciation since the start of the year as even more of an irritation; as the strong currency is putting additional pressure on prices.
Should the trend in AUDUSD not reverse on its own accord there is a high likelihood that the RBA will take action again.
While this RBA’s minutes seems uneventful this time:
The RBA left the cash rate on hold at 1.5% two weeks ago and delivered a statement broadly in line with expectations.
As a result, you see FX OTC market for AUDUSD pair has been losing the traction in hedging activities, IVs across all time frames are reducing significantly.
Thus, we doubt the minutes from September’s Board meeting will provide much new information on the monetary policy outlook or how the Bank views recent economic developments.
In regard to the outlook, we continue to believe that the RBA cash rate has not yet reached its trough for this cycle, and expect a further 50bp of easing in H1’17.
But with September the last meeting with Governor Stevens at the helm, a new RBA hierarchy will be guiding decisions on the RBA cash rate, with Governor Lowe and Deputy Governor Debelle taking charge in their respective roles from September 18.
