In a decision which most economists expected, the RBA has held the official cash rate steady at 1.50%. Reactions in bond and currency markets were subdued. The AUD fell roughly 0.1 US cents on the day, while the 3 year bond yield rose 1bps to 1.96% and the 10 year bond yield rose from 2.76% to 2.79%. Futures prices in the cash market reacted in a way which implied investors thought the chances of a rate cut through to November 2017 had increased while the chances of a rate rise from December 2017 onwards had fallen.
The RBA can change the official rate on any day but traditionally it will only do so at its monthly meeting unless the circumstances are extraordinary. However, meetings held in the months of February, May, August and November are favoured as they come just after the release of quarterly CPI figures. There is no January meeting and so the focus of economists will turn to February’s meeting as the next possible time when the RBA will seriously consider a rate change.
