Company News

POLL-Australia seen holding rates next week, cut seen in Nov

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?s=GCR01+2H+7&st=Menu+G+C poll data

* RBA decision expected on Oct 6 at 0330 GMT

SYDNEY, Oct 1 (Reuters) - Australia’s central bank will likely hold key rates at a record low 0.25% at its monthly policy meeting on Tuesday, according to 36 economists polled by Reuters, though an overwhelming majority expect a cut in November.

As many as 25 of the 36 surveyed, or 70%, expect no change to policy at the Reserve Bank of Australia’s (RBA) Oct.6 board meeting, 10 predicted a 15 basis point cut to 0.1% while 1 forecast a 10 basis point cut to 0.15%.

A cut to 0.1% is forecast later this year, according to 25 of the 36 polled while policy rates are then seen unchanged at 0.1% through mid-2022.

Economists said the RBA would want to assess measures in the federal budget, also due on Oct.6, given the RBA’s recent emphasis on the importance of fiscal stimulus.

It would also try to avoid an appearance of easing to reduce the government’s borrowing costs, “given the Governor has strongly pushed back against direct monetary financing of deficits,” Morgan Stanley analysts wrote in a note.

“We think, given market pricing, the RBA would keep a very dovish tone in the statement,” they added.

The RBA had, in March, cut the cash rate to 0.25% and launched an unlimited bond buying programme to depress three-year bond yields in a bid to shield the blow to the country’s economy from the coronavirus-driven recession.

It has since left the rate unchanged, though last month expanded its cheap funding facility for banks to ensure borrowing costs remained low.

Last week, Deputy Governor Guy Debelle signalled the need for accommodative settings while listing some policy options under consideration by the RBA.

The remarks prompted analysts to predict a rate cut later this year, sparking a rally in government bonds and sending the Aussie dollar to a two-month trough of $0.7008. (Reporting by Swati Pandey; Editing by Kim Coghill)