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3 Mar 2015
RBA expected to cut today by 25bps to 2.00% - ANZ
FXStreet (Bali) - Sharon Zollner, Senior Economist and Sam Tuck, Senior FX Strategist, at ANZ, believes that the RBA will cut today by 25bps to 2.00%.
Key Quotes
"The Australian interest rate market diverged sharply from other markets last night in the run-up to today’s RBA interest rate decision. In contrast to US Treasuries and German bunds the Aussie market was well bid from the start, and shrugged off the global selloff later in the session."
"ANZ’s Australia team believes that the RBA will cut today by 25bps to 2.00%, though it is not a clear-cut decision. The data-flow since the February RBA cut has been disappointing (including tepid nonmining capex), suggesting the RBA will see little value in waiting for further confirmation of the need for additional stimulus."
"While expected 2014 growth of 2.7% would be considered more than respectable by most developed countries in this global environment, much of the acceleration in growth in Q4 looks to be due to housing construction and net exports – strength which is of questionable durability."
"China’s rate cut confirms that all is not well in Australia’s largest trading partner. Similar to the New Zealand situation, the fly in the ointment for the central bank is strong housing lending and buoyant housing markets in Sydney and Melbourne. However, Australia is yet to introduce macro-prudential measures to cool housing. An RBA rate cut today would likely lead to a knee-jerk stronger pricing of rate cut odds here in New Zealand (currently 50% odds by the end of July). But our terms of trade look set to lift from H2 of this year, whilst Australia’s does not; the economies are diverging.
Key Quotes
"The Australian interest rate market diverged sharply from other markets last night in the run-up to today’s RBA interest rate decision. In contrast to US Treasuries and German bunds the Aussie market was well bid from the start, and shrugged off the global selloff later in the session."
"ANZ’s Australia team believes that the RBA will cut today by 25bps to 2.00%, though it is not a clear-cut decision. The data-flow since the February RBA cut has been disappointing (including tepid nonmining capex), suggesting the RBA will see little value in waiting for further confirmation of the need for additional stimulus."
"While expected 2014 growth of 2.7% would be considered more than respectable by most developed countries in this global environment, much of the acceleration in growth in Q4 looks to be due to housing construction and net exports – strength which is of questionable durability."
"China’s rate cut confirms that all is not well in Australia’s largest trading partner. Similar to the New Zealand situation, the fly in the ointment for the central bank is strong housing lending and buoyant housing markets in Sydney and Melbourne. However, Australia is yet to introduce macro-prudential measures to cool housing. An RBA rate cut today would likely lead to a knee-jerk stronger pricing of rate cut odds here in New Zealand (currently 50% odds by the end of July). But our terms of trade look set to lift from H2 of this year, whilst Australia’s does not; the economies are diverging.