RBA will command the attention of global investors tomorrow - BBH

Research Team at BBH, suggests that the Reserve of Bank of Australia will command the attention of global investors this week.

Key Quotes

“It is a close call, though the median in the Bloomberg survey favors a cut, including most of the banks in Australia that participate in the poll.

The case for it is that price pressures are weakening, and credit growth is slowing.  The currency has begun appreciating again, and the Federal Reserve cannot be counted on to lift US rates until the end of the year, at the earliest. 

The argument against the RBA moving is that there is no urgency to exit the "watch and wait" mode.  A rate cut would not necessarily weaken the currency as Australia would still offer highest policy rate (after New Zealand) among the high income countries. It is also not clear that the record low interest rates are a constraint on credit growth. Better keep the powder dry and see how events evolve, though it can be fairly confident that New Zealand will cut interest rates later in August.”