RBA: On the lookout for mood swings - AmpGFX

The RBA Governor’s speech last week suggested that the RBA is very comfortable with the current policy settings and a hike is unlikely for several months, arguably not until well into next year, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.

Key Quotes

“On the other hand, the minutes from the 4 July policy meeting, released on 18 July, gave a number of hints that the growth and even the inflation forecasts in the quarterly Statement on Policy will be upgraded.  If so, the RBA policy statement on Tuesday, 1 August might generally sound more optimistic, referencing an improved economic outlook that is to be released in the quarterly RBA Statement on Monetary Policy on Friday, 4 August.”

“The RBA is likely to at least acknowledge in their policy statement on Tuesday that the AUD has appreciated recently.  It could attempt to talk it down by saying that this complicates the adjustment in the economy (as opposed to recent statements where it has said an appreciating exchange would complicate the adjustment).”

“The RBA has provided little guidance on policy this year.  But Governor Lowe and Deputy Debelle have attempted to quell speculation that the RBA may respond to policy normalization abroad.  It is unlikely in our view, but possible that the RBA guide in its policy statement that a period of stable rates would be prudent. Any such guidance, especially combined with a more direct comment on the exchange rate complicating adjustment, could see significant knee-jerk selling in the AUD.”