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RBA may be compelled to deliver another rate cut by next month – TDS

FXStreet (Delhi) – Research Team at TDS, note that as Westpac, Australia’s second-largest mortgage lender, lifted owner-occupied mortgage lending rates by 20 bps, it has led to speculation that the RBA may be compelled to deliver another rate cut as soon as next month.

Key Quotes

“We disagree and think the market is misinterpreting the implications of this move. The boost to higher housing rates will come as little surprise to the RBA, who has repeatedly warned that tighter liquidity and rising capital requirements imply that higher mortgage rates are inevitable.”

“At the same time, policymakers have expressed concern that housing markets have been overheating in some markets and the high level of household debt has been a nagging concern. This backdrop suggests that even if the RBA were to cut rates, there is little guarantee that banks would pass that along to consumers.”

“For the RBA, this would be a wasted bullet. We expect the RBA to remain on hold from here and only deliver more easing as a response to a marked deterioration in the global growth outlook. Accordingly, we think this latest dip to the 0.7240 area presents a near-term buying opportunity in AUDUSD, looking for a move to test resistance around 0.7530.”

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