Market looks to Aust, US rates guidance

Investors will be watching for guidance on future interest rate moves from both the Reserve Bank of Australia and the US Federal Reserve this week.

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The RBA on Tuesday releases the minutes of its June meeting, when it left the cash rate at a record low two per cent following May’s quarter of a percentage point cut.

RBA governor Glenn Stevens provided little guidance on any future moves with that June 2 decision but last week made it clear further rate cuts are feasible.

“We remain open to the possibility of further policy easing, if that is, on balance, beneficial for sustainable growth,” Mr Stevens told the Economic Society of Australia on Wednesday.

“I think it’s quite some time before we even think about interest rates going up.”

AMP Capital chief economist Shane Oliver said Mr Stevens’ speech had laid to rest any doubt the RBA retains an easing bias.

“Of course there were numerous qualifications around this – in particular the risks around low interest rates – but the clear message is that another rate cut is under serious consideration,” Dr Oliver said.

CommSec chief economist Craig James believes the standout event for investors this week is the meeting of US Federal Reserve policymakers, with their interest rate decision due to be handed down at 4am (AEST) on Thursday.

“No one expects the interest rate `normalisation’ process (rate hikes) to begin just yet, but investors will be hoping for future guidance,” he said.

Dr Oliver expects the Fed will signal that it remains on track to hike rates later this year providing economic data continues to improve.

Australian shares should start the week lower after US stocks fell 0.8 per cent on Friday.

The market will also monitor speeches by RBA assistant governors Christopher Kent and Guy Debelle on Monday and Tuesday for any clues regarding the outlook for interest rates.