Upcoming RBA Interest Rate Decision & Statement

Upcoming RBA Interest Rate
Decision & Statement 

The Reserve Bank of Australia (RBA) will be releasing
its monetary policy statement and interest rate decision on Tuesday. The
upcoming statement from the RBA is expected to bring impact onto the market, as
Governor Philip Lowe previously mentioned in a press conference that the bank
might consider slashing interest rate to 10 basis point (0.10%) from 0.25%.

From the statement, the first out of three high
possibility scenarios that can be expected is that the RBA will cut their
interest rate during Tuesday’s meeting. Possibility for this scenario is less
likely as the bank is in no rush to make the sudden cut. Until a longer time
period shows significant changes or impacts from previous policy loosening
and/or stimulus by the government, the bank will continue to monitor the
economy before implementing further policy tools.

A higher possibility scenario is that the bank will
not make any sudden decisions on Tuesday. 
However, the bank should acknowledge the previous rate cut statement
mentioned by Lowe during his conference in July. The bank may state that they
are not ruling out further rate cut possibilities; however, they will wait and
see how the economy performs in the near future.

Another scenario would be the RBA maintaining a
neutral stance in their statement; one which should include that there will be
no need for any policy tool implementation until further signals surface on the
market. Given the current market situation, it is still early for the bank to
provide a longer-term overview of the country’s economy. All in all, the RBA’s
statement will provide the current overview towards Australia’s economy, with
briefed comments towards the second quarter’s economic performance.

Further monetary policy loosening isn’t unlikely, just
that it would incur higher costs, which would then reduce the efficiency of the
tool. Instead, most central banks at the moment would bet on more fiscal tools
from their governments before tampering with their policy tools.