Recent comments by RBA Governor Lowe about the outlook for monetary policy all but confirmed that the RBA will leave rates at 1.5% at their last meeting for the year this Tuesday and probably for a good while after that too. Governor Lowe remarked that “it is more likely that the next move in interest rates will be up, rather than down.” However, this doesn’t mean a rate hike is imminent as Lowe went on to say that “there is not a strong case for a near-term adjustment in monetary policy.”
Financial futures continue to pare back their rate expectations and now see the official cash rate remaining unchanged till late next year. In fact, a full RBA rate hike is not priced in till May 2019 at the moment. With the US expected to raise rates next week and then again (at least twice) next year, this may prompt the Australian dollar to fall from USD0.76 to closer to USD0.70 in 2018.