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4 Jun 2013
Flash: RBA on hold, but still believes AUD is overvalued - Nomura
FXstreet.com (Barcelona) - Nomura economists note that the RBA kept its policy rate unchanged at 2.75%, in line with market expectations.
They add that while the RBA noted that the current level of the policy rate was appropriate, it kept its easing bias and stated that "the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand." Overall, they continue to believe the RBA will cut rates in the next few months, but the timing of this cut depends on incoming data. They feel that while the RBA has indicated that the policy rate is appropriate for now, this does not indicate that it will remain on hold. They add, “In November 2012, the RBA also said that the policy rate was appropriate, but then followed with a cut at the December meeting. As such, the RBA has retained it easing bias by mentioning that there is still some scope for further easing. This means that, if data deteriorate, we could see a cut as early as the next meeting in July.”
They add that while the RBA noted that the current level of the policy rate was appropriate, it kept its easing bias and stated that "the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand." Overall, they continue to believe the RBA will cut rates in the next few months, but the timing of this cut depends on incoming data. They feel that while the RBA has indicated that the policy rate is appropriate for now, this does not indicate that it will remain on hold. They add, “In November 2012, the RBA also said that the policy rate was appropriate, but then followed with a cut at the December meeting. As such, the RBA has retained it easing bias by mentioning that there is still some scope for further easing. This means that, if data deteriorate, we could see a cut as early as the next meeting in July.”