Barclays with an overnight note on the Reserve Bank of Australia Statement following its September monetary policy meeting yesterday
Barclays (in brief. bolding mine)
- In terms of monetary policy, the RBA continues to stick to a cautious bias.
- Although growth data remain supportive, we think the core issues of: 1) low wage growth; 2) subdued CPI inflation; and 3) falling house prices continue to weigh on the economy and maintain the disinflationary outlook.
- We believe these three factors are likely to prevent policy normalisation for some time, even if employment and growth remain relatively strong.
- Against this disinflationary backdrop, we think the RBA is likely to look through the gradual decline in unemployment, even if unemployment rate inches closer to 5% by end-2019.
- The RBA's continued cautious outlook supports our view that the rate hiking cycle is likely to begin only in H1 20, with the first hike likely coming in Q1 20, and a second in Q2 20.
- We believe the RBA will wait to see a material increase in inflation before signalling a move in interest rates. If inflation and wage growth rise at a faster pace than we forecast, we think the RBA could be open to moving in 2019
