The following is Nomura's first reaction to today's RBA policy decision:
"The Reserve Bank of Australia (RBA) lowered its policy rate to a record low of 2.50%, in line with Nomura and market expectations. As it did at the May meeting, when the RBA last reduced its policy rate, the central bank noted that “the inflation outlook could provide some scope to ease policy further, should that be required to support demand” and decided to use some of that scope to stimulate the economy. The RBA also added that ‘the Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time”, a formulation also used in May which suggests that further cuts depend on incoming data. Overall, today’s cut was in line with our long held view that the RBA will need to cut more to support demand from the non-resources sector. We expect the RBA to cut its policy rate by another 25bp at the November meeting, unless inflation surprises to the upside."
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