RBA Stevens strikes not so dovish tone; good deal of rate cuts in pipeline

RBA Governor Stevens is testifying before the House of Representatives Standing Committee on Economics, and if one is to make an early judgement on his language, it seems as though he is sounding much less dovish than the market was expecting, which has led to an important boost on the Australian Dollar.

According to the RBA Chief, the Australian economy is near its average trend growth. Referring to China, he sounded confident that the Chinese slowdown is about to end. He said a good deal of interest rate stimulus in pipeline, which is suggestive that rate cuts have been reduced enough for now. This statement will raise the question of a temporary easing cycle being over.

He also mentioned that the high A$ has been relevant factor in setting rates, adding that the RBA Board at Feb. meeting decided prudent to sit still without cutting rates.

The external environment for Australia remains broadly positive, and Stevens does not expect a significant fall in mining investment, with resources exports likely to strengthen substantially.

To sum up, Steven's speech may be a game changer in terms of how RBA monetary policies are perceived going forward, as the sense is that the easing cycle may be over. Expect plenty of commentators speculating on this outcomes in the next few days.