Previews of the Reserve Bank of Australia are coming in fast
- Announcement & Statement from Governor Lowe scheduled 0430GMT
- The widespread expectation is for no change in the cash rate
- The Statement is, on balance, expected to be a little more upbeat
I posted a few of previews already:
- via ANZ
- UBS note on what to expect from RBA
- HSBC preview
This now from Westpac (in summary):
- Reserve Bank is widely expected to leave interest rates unchanged
- Rates were last moved in 2016, with cuts in May and August
- The Bank has highlighted the labour market and housing as key areas of concern
- Developments for both will reinforce the on hold decision
- Labour market concerns will have eased with jobs growth surprising to the high side in both March and April, although movements in hours worked were less convincing
- On housing, the RBA will keep a watching brief, monitoring the impact of recent macro-prudential measures
- We continue to expect the RBA to remain on hold throughout 2017 and 2018
A bit more. WPAC looking a little further ahead:
- Beyond August, we expect the RBA's views on growth prospects to become less constructive. Westpac continues to expect growth of around 2½% in 2018, well below the RBA's current 3¼% forecast. By year end, key parts of our view will become more apparent - disappointing global growth outcomes, a continued slide in commodity prices and a downturn in dwelling construction in particular.
- A downgraded 2018 growth view and the prospect of a more protracted period of labour market slack and inflation weakness will clearly test the resolve of the RBA's 'firmly on hold' stance.
- However, we expect it will still be insufficient to prompt the Bank into additional policy easing. Given its concerns about potential financial stability risks, and the experience from 2016 - when rate cuts quickly reignited housing markets - it will be reluctant to move rates any lower. On its own, a growth outlook marginally below trend is not likely to be enough. The Bank would have to be convinced that a further cut in rates would deliver a significant enough boost without leading to unacceptable financial stability risks down the line. Another material undershoot on inflation could prompt more of a rethink, but this also looks unlikely - Westpac expects core inflation and wages growth to lift from here, albeit only slowly. The bottom line is that building a case for official interest rates to move either way will be difficult. Hence we continue to see no reason to change our long held view that the official cash rate will remain on hold throughout 2017 and 2018
