Australia: No reason for a rate cut – TDS

Australian Interbank futures are now placing > 100% chance the RBA cuts 25bps tomorrow but analysts at TD Securities see little reason for the Reserve Bank of Australia (RBA) to cut tomorrow. AUD/USD trades at 0.6545.

Key quotes

“If there is no co-ordinated policy action, we see little reason for the RBA to cut the cash rate tomorrow. We believe the RBA can afford to wait for more information before it acts.”

“The RBA runs the risk that cuts may not help the economy - tourist and foreign student numbers are unlikely to jump in response to rate cuts.” 

“With the monetary policy transmission mechanism having diminished, we believe the RBA and Government are more likely to achieve a greater impact via alternative targeted measures such as providing support for small firms via a special lending facility or more far-reaching fiscal stimulus.”