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September 2016

RBA minutes – stable outlook for interest rates

Published: Tuesday 20 September 2016

  • RBA minutes – stable outlook for interest rates
  • FED expected to keep interest rate on hold tomorrow
The Australian Dollar gained ground during the Asian session as Reserve Bank of Australia minutes suggested that the central bank is in no rush to cut interest rates again. The RBA noted that the economy grew at "around estimates of potential growth over the first half of 2016, despite further large falls in business investment." They noted that the current monetary policy stance was consistent with sustainable growth in the Aussie economy and for achieving the inflation target. They are clearly in no hurry to cut interest rates and this is now very unlikely to happen this year. Policy makers will be watching the third quarter inflation data as a weaker outcome could tip the balance in favour of a move.
Elsewhere the markets are awaiting the news from the Federal Reserve tomorrow. The Fed is expected to keep interest rates on hold, despite concerns that the strength of the world’s largest economy warrants a rise in borrowing costs. Analysts on Wall Street have said there was little likelihood of an interest rate rise when Fed officials meet on Wednesday, saying there was only a 12% chance of a hike from the current 0.5% rate.
Forecasts of a rate rise in September were downgraded following a 1.1% rise in annual inflation reported in August, up from 0.8% in July. There will be a great deal of pressure on the Fed to raise rates in December if, as expected they hold this week. Donald Trump, amongst others has complained that the low interest rates are denying savers a return on their pension funds and fostering a speculative stock market bubble. We will look for any hawkish sentiment from the FED tomorrow. There is a real dearth of data ahead of the interest rate announcement tomorrow so current trends should remain in place ahead of expected volatility around the announcement on Wednesday. 

Lost property

Eight Unusual Baggage Left Behind On London's Public Transport System
  • Samurai sword
  • Prosthetic arm
  • A coffin
  • A stuffed fox
  • A puffer fish
  • A lawnmower
  • WW2 gas masks
  • A park bench

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
USD 13:30 US: Building permits 1.14m 1.17m
USD 13:30 US: Housing starts 1.21m 1.19m
CAD 18:00 BoC Gov Poloz speaks    

Daily Currency Analysis by Charlie Horsley

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