Why Australia Can Still Afford to Hold Rates
- Traders take out `Chinese' insurance in liquid Aussie markets
- Economy recorded biggest annual employment gain since 2006
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A stronger Australian jobs market and stimulus from a weaker currency give central bank Governor Glenn Stevens room to hold fire on further interest-rate cuts, even as his international counterparts scramble to calm markets upset by China’s slowdown.
Traders are pricing in a negligible likelihood Tuesday’s Reserve Bank of Australia policy meeting will produce a reduction in the record-low 2 percent cash rate and only two economists expect an easing. Market pricing of a possible cut later this year may reflect the perceived risks related to Australia’s biggest trading partner, China, rather than expectations the local economy will require further stimulus.