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Currency Analyst since 2010

RBA won't cut rates

The recent article in Wall Street Journal argues that the Reserve Bank of Australia wouldn’t cut interest from the record low of 2.5% on Feb. 4.

Recent data showed Australia’s inflation cam at 0.8% in Q4 (forecast: 0.5%). For the full year, inflation ran at 2.7%, toward the top of the RBA’s 2%-3% target band. NAB business confidence showed that business conditions are at their best levels in close to 3 years. Housing construction and house prices also are responding to the low rates, and there’s compelling evidence that retail sales are growing quickly, says WSJ. 

Surely, not everything is well. Economic growth this year is still forecast to be below its long-term average of 3.0%. The biggest problem is the slowdown in the mining sector: falling commodity prices have forced mining companies to cancel investment plans, shut mines and lay off workers. Australian payrolls contracted in Dec.

Still, even if the RBA’s still thinking about cutting the benchmark rate it wait for now and take time to plan its next move.

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