I've been posting previews on the Reserve Bank of Australia meeting all last week, so I thought I'd gather them together here in one post.
Before that, though, I posted a preview this morning also, that is here:
- AUD - RBA announcement due 0430GMT - on hold expected
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And, just to mix it up a little, here are last week's previews in 'save you a click' format!
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ANZ on 'what to watch' in Australia next week:
- RBA Board meeting (4 April): The RBA is widely expected to keep rates on hold, at 1.5%. Commentary around housing, inflation and the labour market will be particularly important in the post meeting statement.
- RBA communication: RBA Governor Lowe is speaking at a Reserve Bank Board Dinner (4 April), while Head of Economic Analysis Alex Heath is participating in a panel on 5 April, and Deputy Governor Guy Debelle is presenting 'Recent trends in Australia's capital flows' to the AFR Banking and Wealth Summit on 6 April.
- Data heavy week: In addition to retail trade, building approvals and trade data for February, CoreLogic house prices (Feb) and ANZ job ads (March) will be released (both on Monday). With the housing and labour markets both in focus, these data will be important.
From ANZ's "Australian Macro Weekly"
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Barclays AUD forecasts & RBA outlook
OK, onto their reasoning and outlook for the RBA (bolding is mine):
We see the AUD falling gradually against the USD in 2017.
- Althoughimproving domestic fundamentals and a less dovish RBAshould provide support for the AUD,external factors are likely less favourable
- China's plans to curb property speculation and informal sector credit growth, and to run a less easy monetary policy, mean that the support for commodities could wane.
- Our Commodities Research team believes that the price rally in iron ore is not sustainable and forecast prices to fall to the mid-$50s/t in H2 17.
- TheAustralia-US yield differentialwould continue to narrow in 2017, taking into consideration our forecast of two more Fed rate hikes this year while the RBA remains on hold -historically, AUDUSD has more often than not moved in the direction of yield differentials.
RBA appears comfortable with current policy stance, but may turn incrementally more neutral.
- We think thelow household income growth, low wage growth and improving profitability continue to point to restraint at the RBA, despite the recent run-up in commodity prices.
- We still expect the RBA to keep rates on hold through 2017. However, if growth starts to firm up,we think the guidance from the RBA may turn more neutral in coming months.
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Here is a quick view preview of what the big 4 Australian banks are saying to expect from the Reserve Bank of Australia next week (meeting Tuesday April 4)
WESTPAC:We have argued that conditions around employment and household incomes are consistent with lower rather than higher rates but that housing market conditions preclude lower rates. The Reserve Bank will also be mindful of its experience in 2015/16 when the application of macro prudential policies around investor loans sharply slowed house price inflation. Those policies were complemented by the banks raising rates on investment loans and the standard variable mortgage rate. The combination proved effective, with house price inflation slowing abruptly from a double digit annual pace to flat We remain comfortable with our view that rates will remain on hold in both 017 and 2018.
ANZ:
If inflation is already low and you are conscious of the feedback this is having into cost pressures, then the last thing you do as a policy maker is risk tightening prematurely. We think the bank is a long way from even considering a rate hike, even with a more positive global environment. Indeed, with the data revealing a tick-up in the unemployment rate after the RBA board meeting, we think the prospect of another rate cut remains higher than that of a hike.
NAB:
The RBA is becoming increasingly focused on financial stability considerations, particularly household balance sheets in the context of a re-acceleration in house price growth in Sydney and Melbourne amidst elevated levels of household debt. Recent comments from RBA officials raise the possibility that macro-prudential measures may be stepped up and we now consider a further rate cut as unlikely in this environment. We have removed our expectation of a 25bp rate cut in late 017, although continue to flag the risk of further monetary policy easing at some point given our concerns about economic growth and the labour market in 2018.
CBA:
We see little chance of further policy easing despite core inflation running below target and the unemployment rate being above the level associated with full employment. The consistent message rom the RBA over the last six weeks has been that rate cuts are off the table. In our view, it would take a sustained loss of momentum in job creation or a fall in dwelling prices for Lowe to entertain he idea of taking the policy rate lower. Neither outcome is in our central scenario and as such, we see the RBA on hold over 2017 and well into 2018.
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(this one by Ryan):
A Reuters poll on the next RBA move
With the next RBA policy meeting next week, Reuters have run a poll on what the RBA will do over the next year or so.
- 8 economists say they'll hike by early 2018
- 7 say they'll cut
- All say they'll stay on hold next week
Ok, I'm massaging the story a touch as the 8 & 7 mob are out of 47 economists, the balance of which say rates will still be unchanged come early 2018. 50 were surveyed about the decision next week.
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HSBC's Paul Bloxham
We see the RBA firmly on hold in coming months. We see the risk to the cash rate outlook as highly asymmetric, given that the RBA's financial stability concerns mean the hurdle for a rate cut is very high. The question is not whether the RBA cuts, but when will it hike.
A clear point of focus will be the Q1 CPI print, which is due to be published on 26 April. We see underlying inflation remaining below the RBA's 2-3% target band but expect that it should be past the trough. We see underlying inflation and wages growth gradually lifting in the second half of 2017 and the RBA lifting its cash rate in 01 2018.
AUD forecasts:
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Paul Brennan is chief economist at Citi, comments on the Reserve Bank of Australia meeting due this week
- Says the decision for the RBA is a 'no-brainer'
- Monetary policy is currently sandwiched between low (below target) underlying inflation & reaccelerating house prices
- On house price growth, Brennan says more APRA initiatives should be coming down the track
(Brennan referring to Friday's tightening of macro prudential measures by the Australian Prudential Regulation Authority last week -post here for detail on these)
- Says the May meeting might be more interesting, it is 'somewhat live', citing for focus on Q1 inflation data (due on April 26)
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- The RBA announcement and accompanying statement will be out at 2.30pm local time on Tuesday 4 April 2017
- (0430GMT on Tuesday 4 April 2017)
- Cash rate is currently 1.5%
- RBA Governor Philip Lowe will speak on Tuesday evening (7.15pm local time, 0915GMT))
Following the Tuesday meeting we get the latest Financial Stability Review (April 13), There will be a focus on amount of debt held by Australian households, their ability to re-pay it and the risks it poses. Governor Lowe has been vocal on the negative impact high debt is having on consumer discretionary spending.
