RBA’s Lowe Suggesting More Rate Cuts If the FED Cuts RatesToo - Forex News by FX Leaders
Lowe is leaving the door open for more rate cuts

RBA’s Lowe Suggesting More Rate Cuts If the FED Cuts RatesToo

Posted Tuesday, June 4, 2019 by
Skerdian Meta • 2 min read

The Reserve Bank of Australia cut interest rates last night from 1.50% to 1.25%. They were expected to cut rates last month but they held off that time and instead they cut interest rates today. But, the Aussie didn’t move much and the reason for that was anticipation. Markets knew this time the RBA had no choice but to cut rates, so no move in AUD pairs. Now the RBA Governor Lowe is making a speech and from what I am hearing, he is suggesting more rate cuts if the FED will cut interest rates this year.

Comments from Lowe

  • Not unreasonable to expect a lower cash rate from here
  • The board has not yet made a decision, much depends on labour market
  • Economic forecasts had assumed rates at 1% by year-end
  • Rate decision was not in response to deterioration in outlook since May
  • Easing aimed at spurring jobs growth, lifting inflation
  • Rate cut is to lead lower AUD than otherwise would have been the case
  • One option is for fiscal support, including spending on infrastructure
  • Says that banks should fully pass through rate cut through mortgage rates
  • Well aware that savers will be disappointed by rate cut
  • No reason to change inflation target band
  • If unemployment rate can get to 4.5%, inflation will rise
  • Current central estimate for full employment is near 4.5%
  • Weaker US dollar would complicate rate outlook
  • AUD didn’t move much on rate cut as it was expected
  • Not anticipating getting to low rates seen in UK or Canada
  • But we have the capacity to do so, if we have to
  • Very concerned about threat of global trade wars
So just reaffirming the message we got from the central bank statement this morning. There is no firm commitment to future rate cuts and that they will be data dependent. But also that future rate cuts are not off the table, which will keep us guessing for now. Although, we can get a signal from the FED, if they point to a rate cut, then the RBA should also start thinking about cutting rates again.
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About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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