RBA: Rate cuts to continue into 2020 – Wells Fargo

The Australian central bank cut its cash rate by 25bps to 0.75% earlier today. Analysts at Wells Fargo, expect the Reserve Bank of Australia (RBA) to continue its easing cycle into 2020 and downward pressure to remain on the Australian Dollar for the time being.

Key Quotes: 

“Today’s interest rate cut also marks the third time the RBA has eased monetary policy this year, and the Cash Rate is now at its lowest point on record. The accompanying statement from the RBA provided additional insight into the rationale for the rate cut, with external developments such as the U.S.-China trade tensions and the trend of easier monetary policy from major central banks cited as the factors.”

“Despite a more positive assessment of Australia’s economy, the RBA seems to have left the door open to additional rate cuts. In the RBA’s statement as well as in Governor Philip Lowe’s subsequent speech, policymaker comments were consistent with a bias towards additional easing."

“The Australian dollar sold-off quite sharply, down around 0.9% on the day, with AUD/USD hitting its lowest point since 2009. Interest rate markets have also priced in about another 7 bps of rate cuts over the next 12-months. In our view, today’s commentary was mildly dovish, and suggest that additional rate cuts are possible. As of now, we expect the RBA to be on hold for the remainder of 2019, although we expect further easing in 2020. We also expect the Australian dollar to remain on the defensive in the next several months.”