RBA holds cash rate for November

The RBA’s decision fell very much in line with market expectation, with ASX 30 Day Interbank Cash Rate Futures indicating only a 6 per cent likelihood of a change to the cash rate as at 31 October.

The ANU Centre for Applied Macroeconomic Analysis (CAMA) RBA Shadow board said prior to the decision that a cut was unlikely given the uncertainty around the US election.

“The RBA should certainly hold rates at the meeting given this uncertainty, but it would not be surprising to see the Board authorising a rate cut in the event that Donald Trump wins that election, which will wreak havoc on global markets,” Shadow board member Mark Crosby said.

“Should [Hillary] Clinton win the election as expected then the case for holding rates appears strongest.”

Several economists noted that concerns around housing prices were also likely drivers behind the decision, which Moody’s Analytics economist Emily Dabbs said

would require the RBA to “[keep] an eye on financial stability”.

Additionally, CommSec economist Savanth Sebastian said debate around the benefits of further cuts was also likely to play a role in the RBA’s decision.