Comments from MNI's Sophia Rodrigues
Why no cut yesterday?
To signal easing beyond 2.0% the RBA must be convinced its updated forecasts show a significant slowing in the economy compared with February
- Despite further declines in iron-ore prices the RBA isn't seeing signs of weakening
- Growth may not be picking up; but that is already forecast
- But, neither is the economy weakening sufficiently to worry the central bank.
And
- The RBA says lending to housing investors is strong but hasn't picked up further
- But, pushing the rate below 2.0% may be too much - unless the Australian Prudential Regulation Authority takes more steps to avert growing imbalances in the housing market
On the Australian dollar:
- The RBA may have felt a cut now, without a signal of further easing, risked pushing the exchange rate higher
- The RBA is now probably surer the exchange rate will decline after the significant falls in main commodity prices
- If its May forecasts suggest a still-lower rate is needed it is more likely than not to move that way
