RBA leaves cash rate on hold; Nov policy meet in focus after examining Q3 inflation

The Reserve Bank of Australia left its official cash rate (OCR) at a record low of 1.50 percent in its monetary policy meeting held Tuesday, after having reduced it by 25 basis points in both May and August. However, the next policy meeting scheduled on Nov 2, will remain in focus after examining the Q3 inflation figures, expected to be released on Oct 31.

The accompanying Statement by the RBA Governor was little changed from the previous month. There was no implicit bias to ease. The statement ended with the view that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

"While we expect economic growth to be close to trend in the year ahead, we are less certain that the RBA’s inflation targets can be reached under current conditions," St George Economics commented in its latest research report.

Further, the economy is growing despite the fully anticipated decline in mining investment. Exports are playing their part in economic growth and jobs continue to grow. However, missing from today’s statement was the RBA’s previously stated belief that the likelihood of lower interest rates exacerbating the risks in the housing market has diminished, the report noted further.

Meanwhile, we foresee that the central bank will slash the OCR in November, unless drastic changes occur in the country’s underlying economic conditions or the housing market regains a stronger-than-expected momentum.

The AUD/USD pair settled at 0.7625 area immediately after the release of the monetary policy statement. The pair is trading at 0.7649 at 7:15GMT.