RBA’s Stevens Expected to Hold at 2% for Rest of Tenure

Traders are increasingly betting Reserve Bank of Australia chief Glenn Stevens will sit tight on policy for the final six months of his tenure, as a commodities rebound reflects ebbing pessimism in the global economy.

His decade-long stint as RBA governor is coming to an end in September and the swaps market is pricing in just 13 basis points of interest-rate reductions in the coming six months. That compares with 28 basis points as recently as March 9. Although Stevens has acknowledged that benign inflation affords scope to ease again if needed, he hasn’t moved the cash rate from an already record low 2 percent since May last year and has signaled a reluctance to cut again.

Higher household spending and dwelling investment helped spur an unexpected acceleration in growth in the final quarter of 2015, underscoring the economy’s resilience even as it shifts away from building mines and China’s expansion slows. It’s also getting a boost from climbing iron ore prices. The paring of RBA bets comes as a stronger currency and easing moves from Europe to New Zealand put pressure on Stevens to add stimulus.

Bloomberg

Stuart McPhee
Stuart McPhee

Australian private trader for nearly 20 years, author, trading coach, licensed adviser and regular speaker at major trading events all around the world. Graduate of RMC Duntroon and former Australian Army Officer.