The Reserve Bank of Australia held its key cash rate at 2 percent, saying that the prospects for an improvement in economic conditions had “firmed a little over recent months.” The central bank said that its board members had observed that the inflation outlook could afford scope for further easing should it be required to support demand. Economists read this as a move to an easing bias.
“The Board will continue to assess the outlook, and hence the whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target,” the RBA said in its post-monetary policy meeting statement. The RBA targets inflation of 2-3 percent over the economic cycle, with inflation for the September quarter coming in at 2.15 percent. The RBA had been expected to keep rates on hold. A Reuters poll of 21 analysts found that 17 expected no cut at the November meeting, with the remainder calling for a cut. The central bank last cut rates in May, following a cut in February.
The Australian dollar had been volatile ahead of the rates call but afterward was steady at $0.7170 after the announcement. Debt markets seemed to suggest investors were not counting on the RBA cutting by year end. Interbank futures for December slid to imply around a 36 percent chance of an easing, from above 70 percent earlier in the day.