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RBA Declares Possibility of Further Drop in Interest Rates

Australian inflation data was made public today. The country’s CPI in Q2 was up 0.7% QOQ and 1.5% YOY. A 0.8% growth in consumer prices was expected QOQ and by 1.7% YOY. The inflation zone which the Reserve Bank of Australia has set is 2-3%.

The governor of the RBA, Glenn Stevens, announced during a press conference today that the interest rates in the country could possibly see a further reduction, but that any further relaxation of monetary policy could have negative consequences for the country’s economy. This is the second time in just a few weeks that Stevens has indicated the possibility of a further drop in rates. The RBA has dropped its rates twice this year since the Australian economy has been experiencing hard times due to the fall in the price of commodities, the end of capital investment in the mining industry and also a slowdown in Chinese economic growth; one of the country’s main trading partners. The Australian dollar finished the Asian session practically unchanged.

The minutes from the Bank of England’s monetary policy committee that were published today show that all nine members voted to keep the base rate of the country the same (at the record minimum of 0.5%) and to keep asset purchasing at 375 billion pounds.

According to the minutes, more and more members of the committee are supporting the idea of lifting rates in the near future. In particular, Ian MacCafferty and Martin Will have been signaling for a number of months now that they could soon start calling for a slight rise in the rates. In a speech, David Miles said that he believes that the arguments for a rise are stronger than they have ever been in his six-year stint on the committee. Miles is due to leave the committee after the next meeting.

After a July meeting, Greece and its international creditors have come to an agreement which has lessened the risk of default for the country, at least in the short term. This could convince those who believe that high rates are beneficial for the UK, due to it leading to risks, caused by economies outside of the country, waning. Nevertheless, it’s unlikely that the decision about the rate rise is likely to be taken before 2016. The Bank of England’s Mark Carney announced earlier that, according to his expectations, the question of whether to start putting rates up will become clearer towards the end of the year. The publication of the Bank of England’s minutes provoked fluctuation on the British pound.

Today the Greek parliament is due to convene and discuss reforms. The ECB will make a decision today on whether to increase the emergency liquidity aid to Greek banks.

The euro/dollar is trading at 1.0931 in expectance of powerful drivers for movement. We may see news on Greece this week and next week the US Fed is due to convene.

Today it’s worth casting a glance at data on US oil reserves from the US ministry for energy. Yesterday’s data from the API showed a rise of 2.3 million barrels.

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