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Australian dollar awaits Fed rate decision
Published on 17.03.2015 11:13

The Australian dollar remains flat today after disappointing factory data out of the US and the latest minutes release from the Reserve Bank of Australia.

At 6.13pm (AEDT) the Aussie dollar was trading at US76.38c down from US76.40c in yesterday’s trade.

U.S. industrial production increased 0.1 percent in February, less than the 0.2% expected by analysts although up from -0.3% in the previous month.
 

Industrial capacity utilization came in at 78.9 slightly below expectations 79.5 and down from 79.1 in the previous month.

The disappointing numbers lead some to believe, including BK Asset Management managing director Kathy Lien that The US Federal Reserve will be in no hurry to lift interest rates at their meeting scheduled for tomorrow,

"We had broad-based weakness in US data ... all surprising to the downside," she said

"All of this led investors to believe that the US Federal Reserve will be emphasizing patience at this week's meeting." She also added.

In the release of their latest minutes meeting today the RBA also weighed in on the US interest rate debate by noting that analysts and the US Fed see things differently on the timing of an interest rate rise,

 

“Market expectations for increases in the US federal funds rate had been brought forward over February, following better-than-expected employment data. It remained the case, however, that the markets implied future tightening of monetary policy was considerably more drawn out than the expectations of members of the Federal Open Market Committee”, the bank noted

Explaining their decision for keeping rates on hold this time round, the RBA noted that time was needed in order for the economy to reposition itself,

“In considering whether or not to reduce the cash rate further at this meeting, members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change” they said

“Taking account of all these factors, members judged it appropriate to hold the cash rate steady for the time being”, they also added

Leaving the door open for further rate cuts the central bank also noted that further rate cuts may be needed in order to keep the economy moving forward,

 “Further easing over the period ahead may be appropriate to foster sustainable growth in demand while maintaining inflation consistent with the target.”


Andrew Masters

Analyst

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