Market news
04.02.2020, 14:02

The RBA sounds too optimistic - ING

Francesco Pesole, an FX Strategist at ING, notes the Reserve Bank of Australia (RBA) kept rates on hold overnight, whilst keeping the door open for more easing if necessary. 

"The Bank has welcomed progress in labour and inflation numbers and only marginally mentioned two key risk factors – bushfires and coronavirus – for the economic outlook. More details will come from Governor Philip Lowe's speech at 0130GMT tomorrow and the Statement on Monetary Policy on Friday. For now, our feeling is that the Bank has opted for a wait-and-see approach in order to better assess the impact of these two factors before venturing into even lower rates (the Cash Rate is at 0.75%) which would inevitably prompt a discussion around unorthodox monetary policy. In our view, the RBA has likely remained too sanguine on the economy, and we remain of the view that more easing will be necessary in the coming months, especially considering the high exposure of Australia to the Chinese economy (which will likely slow on the back of the coronavirus)."

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