2 Dec 2014
RBA cash rate left unchanged at 2.5% - TDS
FXStreet (Barcelona) - With commodity prices falling further AUD has ample room to fall, but this doesn’t imply the need for a rate cut in the cash rate anytime soon, note the TD Securities Research Team after RBA left the cash rate unchanged at 2.5%.
Key Quotes
“RBA cash rate was left unchanged at 2.5%. As the key iron ore price has fallen by another 7% and the AUD has fallen by 2-3c since the prior November meeting, and the RBA board doesn’t meet in January, there was an opportunity to use this communiqué to voice the Board views on these issues, rather than tinker with the odd word or phrase.”
“As it turns out we were left empty-handed again as the overall language remained unchanged, where the “period of stability” for interest rates remained unchanged, as it has since February, and the exchange rate phrase “remains above most estimates of its fundamental value” was a repeat of September and November.”
“The fresh insight was confined to the Board saying that key commodity prices have fallen “significantly”, hence the AUD has ample room to fall further. Does this automatically imply that the RBA cash rate needs to fall further, and soon? We remain less convinced.”
“Government spending was mixed for Q3, with consumption up a solid +0.8%/qtr but investment shrinking by -4.4%/qtr. As consumption outpaces investment by a wide margin, the public sector is neutral for Q3 GDP overall.”
“The current account deficit at -$A12.5b for Q3 and -3.1% of GDP was exactly as expected. We expect the deficit to remain at around -3% of GDP over 2015, as a lower AUD boosts non-resource exports and import growth remains benign, before narrowing in 2016 as the LNG export boom takes hold. Net exports are expected to add +0.8%pts to Q3 GDP, also as expected, hence no change to our +0.8%/qtr or 3.2%/yr GDP forecast for tomorrow.”
Key Quotes
“RBA cash rate was left unchanged at 2.5%. As the key iron ore price has fallen by another 7% and the AUD has fallen by 2-3c since the prior November meeting, and the RBA board doesn’t meet in January, there was an opportunity to use this communiqué to voice the Board views on these issues, rather than tinker with the odd word or phrase.”
“As it turns out we were left empty-handed again as the overall language remained unchanged, where the “period of stability” for interest rates remained unchanged, as it has since February, and the exchange rate phrase “remains above most estimates of its fundamental value” was a repeat of September and November.”
“The fresh insight was confined to the Board saying that key commodity prices have fallen “significantly”, hence the AUD has ample room to fall further. Does this automatically imply that the RBA cash rate needs to fall further, and soon? We remain less convinced.”
“Government spending was mixed for Q3, with consumption up a solid +0.8%/qtr but investment shrinking by -4.4%/qtr. As consumption outpaces investment by a wide margin, the public sector is neutral for Q3 GDP overall.”
“The current account deficit at -$A12.5b for Q3 and -3.1% of GDP was exactly as expected. We expect the deficit to remain at around -3% of GDP over 2015, as a lower AUD boosts non-resource exports and import growth remains benign, before narrowing in 2016 as the LNG export boom takes hold. Net exports are expected to add +0.8%pts to Q3 GDP, also as expected, hence no change to our +0.8%/qtr or 3.2%/yr GDP forecast for tomorrow.”