The Australia 200 trades 8 points (-0.10%) lower at 8854 as of 3.15pm AEST.
The Australia 200 (ASX 200) is poised to close lower today, ending its three-day winning streak after the Reserve Bank of Australia (RBA) kept interest rates on hold at 3.60% as widely expected and sounded more hawkish than anticipated.
RBA’s economic outlook and rate decision
The RBA noted that ‘both headline and trimmed-mean inflation were within the 2–3% range in the June quarter. Recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected at the time of the August Statement on Monetary Policy.’
The RBA also highlighted that private consumption is picking up and the housing market is strengthening, indicating that recent interest rate decreases are having an effect.
Regarding the labour market, the RBA stated that while ’employment has slowed by slightly more than expected,’ various indicators suggest the labour market remains tight.
Potential factors for rate cut in November
Whether the RBA opts for a 25 basis point (bp) rate cut in November will depend on the September labour force report due in mid-October and the crucial third-quarter (Q3) inflation print due on 29 October.
It was signs of cooling in the United States (US) labour market, specifically two weak non-farm payrolls employment reports in a row, which resulted in the Federal Reserve (Fed) switching its focus from inflation to resuming its rate-cutting cycle just a few weeks ago.
If we receive a cooler-than-expected Australian labour market in a fortnight’s time (an unemployment rate of 4.3% or higher), followed by a Q3 trimmed-mean print within the range of 0.7 – 0.8% quarter-on-quarter (QoQ), we expect the RBA to cut rates by 25 bp in November.
Conversely, a 4.2% unemployment rate in mid-October, followed by a 0.9% trimmed-mean reading, is likely to keep the RBA on hold through the year-end.