RBA’s Bullock: We did not explicitly consider an interest rate cut today

• We looked at what we found since the previous meeting
• And used that to ask the question whether the current policy stance is appropriate or not
• The discussion was mostly about the economic changes and the impact on inflation
• We have done some scenario analysis on potential Trump policy changes
• It depends on what he says he will do and how other countries react to tariffs
• It may not impact Australia greatly but it may impact us if there is impact to China
• We’re still in wait and see mode though
• The point of today’s statement is to let people know that we have noticed the changes in the data
• Need to be alert of what the data in the next month means on inflation outlook before February meeting

Bullock maintains that underlying inflation remains too high but at the same time when asked about rate cuts in the near-term, she did not outright shoot that idea down either. She just maintained that they will continue to look at the data and assess their views accordingly based on that.

Traders are now pricing in ~56% odds of a 25 bps rate cut for February next year. But if the data continues to soften ahead of that, expect markets to ramp up the pricing and in turn put more pressure on the aussie currency.

This article was written by Justin Low at www.forexlive.com.