Analysts Divided over RBA

Analysts say the Reserve Bank of Australia’s (RBA) decision may come down to the wire at its monetary policy meeting on Tuesday. For analysts calling for further easing, recent data suggesting cooling inflation in September quarter is an impetus for the RBA to reduce its cash rate by 25 basis points to an all-time low 1.75 percent.

“The low September quarter inflation print, coupled with the renewed wave of global monetary policy easing, will force the central bank off the sidelines to lift soft domestic demand and keep downward pressure on the Australian dollar,” Moody’s Analytics said on October 30. But economists from Societe Generale think the central bank will hold off on a rate cut for now.

“Two developments have raised the probability that the RBA will cut rates further. One, Australia’s big banks have raised their mortgage rates by 15-20 basis points, and third-quarter inflation substantially surprised to the downside,” the bank wrote in a report on October 30. “However, we believe that these are not sufficiently powerful to tip the balance in favor of an even lower cash rate from levels that are already at an all-time low. The key argument against a cut is the risk to financial stability.”