The mood on the stock market today could be somewhat tempered in the lead up to the Reserve Bank of Australia's latest decision on monetary policy, even though an interest rate cut today is seen as extremely unlikely.
The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) plunged by 0.7% on Monday after having dipped by as much as 1.6% mid-session due to a combination of Greek debt worries and uncertainty ahead of the RBA's meeting.
As was highlighted by the Fairfax press, not 1 of the 28 economists interviewed by Bloomberg is expecting an interest rate cut, but further easing could certainly be needed in the near future after data released by the Australian Bureau of Statistics revealed "recessionary" level capital expenditure plans by Australian businesses.
Indeed, the cash rate will almost certainly remain at 2 percent following today's meeting, but the market's mood is still likely to be impacted by the commentary provided by the Board. After its last meeting, the sharemarket plunged (even though the Bank had cut rates by 25 basis points) based on the fact that it excluded the line: "Further easing of monetary policy may be appropriate over the period ahead", which it had included in the prior months.
Indications of further easing in monetary policy would bode well for companies such as Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Telstra Corporation Ltd (ASX: TLS), which have all been sold off heavily in recent times. On the other hand, these stocks could be sold down further if no indications are provided.
The RBA will announce its latest decision at 2:30pm (Sydney time) and you can expect a full write-up on the verdict shortly after. Watch this space!
