Has the RBA finished cutting rates?

15.47 AEDT, Tuesday 6 November 2012

Has the RBA finished cutting rates?

By Ric Spooner (Chief Market Analyst, CMC Markets)

The market consensus that there would be another rate cut prior to Christmas is likely to be altered by today’s RBA statement. After deciding not to cut rates today, the Governor’s statement falls short of the easing bias that allows investors to assume a pre-Christmas cut is in the bag.

In last month’s statement the bank noted that it will be important for some other components of demand to strengthen as the mining investment cycle peaks. This time around the Governor simply noted that the Board will be monitoring strength of the other components as the peak approaches. Taken together with the fact that the Board noted some signs of past rate cuts already having effect, it is possible that the RBA won’t cut rates again unless it sees further signs of deterioration in global or domestic demand.

While the Australian Dollar has remained relatively strong despite expectations of further rate cuts, today’s announcement may see some near term strength in the Aussie. When investors return from Melbourne cup parties tomorrow, we may also see some nervousness about consumer discretionary and building industry stocks where the market has been looking forward to a more aggressive rate cutting program.
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