RBA Interest Rate Decision (November 2019)
Posted on: 2019-11-04 • By BCR Market Event


The Reserve Bank of Australia lowered the cash rate by 25 bps to a new record low of 0.75% during its October meeting.

The policymakers said it is reasonable to expect that an extend period of low interest rate will be needed in Australia to achieve more assured progress towards the full employment and inflation target. But RBA Governor Philip Lowe has effectively ruled out the possibility of cutting its interest rate below zero in his recent speech. According to the economists’ forecast, RBA is likely to remain the interest rate unchanged in November’s meeting.


RBA Interest Rate (%)

                                 


RBA Interest Rate Announcement History

Date                                     Previous             Consensus         Actual

05 Nov 2019                    0.75%                 0.75%                  

01 Oct 2019                     1%                       0.75%                  0.75%       

03 Sep 2019                      1%                         1%                       1%

02 Aug 2019                     1%                         1%                         1%

02 Jul 2019                        1.25%                   1%                         1%

04 Jun 2019                      1.5%                     1.25%                  1.25%   

07 May 2019                     1.5%                     1.5%                     1.5%

02 Apr 2019                      1.5%                     1.5%                     1.5%

05 Mar 2019                      1.5%                     1.5%                     1.5%

05 Feb 2019                       1.5%                     1.5%                    1.5%

04 Dec 2018                       1.5%                     1.5%                     1.5%



Opportunities can be found in the statement


Inflation Rate

“The recent inflation data were broadly as expected and confirmed that inflation pressures remain subdued across much of the economy. Over the year to the June quarter, inflation was 1.6 per cent in both headline and underlying terms. The central scenario remains for inflation to increase gradually, but it is likely to take longer than earlier expected for inflation to return to 2 per cent. In both headline and underlying terms, inflation is expected to be a little under 2 per cent over 2020 and a little above 2 per cent over 2021.” Referring to RBA’s Statement on Monetary Policy – August 2019.

The inflation rate rose to 1.7% in the 3rd quarter 2019 from 1.6% in the previous release. The latest inflation reading was in line with market expectations. This was also the highest inflation level since the 4th quarter 2018, which was attributable to a rebound in cost of furnishings, household equipment and services. However, the inflation is still below the 2% target, keeping a low interest rate will firmly support the achievement of inflation target over time.


Australian Inflation Rate (%)


GDP

 “Economic growth in Australia over the first half of this year has been lower than earlier expected, with household consumption weighed down by a protracted period of low income growth and declining housing prices. Looking forward, growth in Australia is expected to strengthen gradually from here. The central scenario is for the Australian economy to grow by around 2½ per cent over 2019 and 2¾ per cent over 2020. The outlook is being supported by the low level of interest rates, recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some housing markets and a brighter outlook for the resources sector. The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income and a stabilisation of the housing market are expected to support spending.” Referring to RBA’s Statement on Monetary Policy – August 2019.

The GDP (YoY) in Australia expanded merely 1.4% in the 3rd quarter of 2019, this is the weakest annual growth pace since 2nd quarter of 2013. Uncertainties remaining from external global economies. In response to the international trade policy of the US, the economic outlook of households, businesses and financial markets will be influenced significantly. Especially in China, the authorities have taken steps to ease financing conditions, partly in response to slower growth in the economy.


Australian GDP Annual Growth Rate (%)


Unemployment Rate

Employment has grown strongly over recent years and labour force participation is at a record high. There has, however, been little inroad into the spare capacity in the labour market recently, with the unemployment rate having risen slightly to 5.2 per cent. The unemployment rate is expected to decline over the next couple of years to around 5 per cent. Wages growth remains subdued and there is little upward pressure at present, with strong labour demand being met by more supply. Caps on wages growth are also affecting public-sector pay outcomes across the country. A further gradual lift in wages growth would be a welcome development. Taken together, recent labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.” Referring to RBA’s Statement on Monetary Policy – August 2019.

Australia's seasonally adjusted unemployment rate unexpectedly edged down to 5.2% in September 2019 from a year-high of 5.3% in the previous month and better than the market expectations of 5.3%. The unemployment rate fell for the first time in seven months, as the number of unemployed decreased markedly by 8,100 while employment rose by 14,700. However the target for jobless rate is 4.5%. RBA is expected to keep patient while continue to monitor developments in the labor market closely.


Australian Unemployment Rate (%)​​​​​​​



Technical View


The Australian dollar/US dollar is testing long-term trend line resistance around 0.6930. The price is expected to remain in the downward trend if failing to break through this resistance level. In the daily timeframe, MACD and RSI is about to rebound from the overbought territory, which means the bearish forces are about to regain control. Focus on the resistance level of 0.6930, if the price breakthrough, it will drive toward north furthermore; otherwise the price is expected to be blocked back. 


AUDUSD D1 Chart​​​​​​​