News Headline Summary

Reserve Bank of Australia keeps rates unchanged at 3.25% vs Exp. 25bps cut to 3.00%

Says:
- Further effects of previous easing can be expected to be seen over time.
- Risk to global outlook still seen on downside.
- China growth has stabilised.
- Inflation data was slightly higher than expected.
- World economy looking slightly more positive.
- Commodity prices remain significantly lower than earlier this year.
- Decided monetary policy was appropriate for the time being.
- Australia's terms of trade have declined about 13% since peak.
- AUD remains higher than expected.
- Inflation will be consistent with target over next one to two years.
- Soft labour market should help contain wage costs.

Reaction details (04:40)

- AUD/USD instantly spikes 40 pips from 1.0369 to 1.0409.
- The immediate reaction in the ASX 200 was a 0.17% move lower from 4486 to 4481.

Analysis details (04:40)

- Although the economists surveyed were anticipating a cut of 25bps the market had been pricing in a more 50% chance between a cut or a hold today given the recent high inflation readings in Australia and a bounce in iron ore prices.
- None the less the fact that today's decision was so evenly split the decision has been interpreted as hawkish by the market with a firm bid going into the AUD.

06 Nov 2012 - 04:30 - Metals Data - Source: Newswires

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