Reserve Bank of Australia monetary policy Board meetings are held the first Tuesday of each month (except in January when there is no meeting)
- The announcement of the decision is made at 2.30pm Sydney time (0330GMT at present)
- Next week no change to rates is the unanimous expectation
Westpac Chief Economist Bill Evans has issued his preview, in which he says "the decision from the Board will be to hold rates steady".
No surprise there, of course.
In brief from Evans' note:
- RBA growth forecast in 2018 is 2.75%-3.75%%
- Well above our (WPAC's) forecast of around 2.5% (with downside risks)
- ... our forecast for a slowdown in 2018 is not consistent with rate hikes - below trend growth signals steady rates at best
- (RBA Governor Lowe) points out that inflation is below the target range ( "a bit low") and the unemployment rate is "a bit high"
- (WPAC) would assess full employment at around 5% so, at 5.8%, there is clear excess capacity in the labour market
On the outlook for rates (bolding mine):
- (RBA's) clear problem with leaning further on interest rates is "The main effect (of a rate cut) would be more borrowing for housing, pushing up house prices..."
- Evans says ... given that both Sydney and Melbourne prices are up 14% (six month annualised - Core Logic data) the Bank and APRA may be considering even tighter macro prudential policies
- If, as we expect, the Bank will get around to adopting additional macro prudential policies to slow housing in the second half of 2017 the stage will be set for another year of steady rates in 2018. With the economy slowing and macro prudential policies further tightening housing markets, the risks to rates in 2018 will be to the downside rather the upside as currently expected by markets.
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Evans on Lowe's view on the AUD:
- Throughout the Hearing (Lowe) indicated a preference for a lower Australian dollar
- He accepts that the AUD is probably around fair value but questioned the feed-back to activity from higher commodity prices with miners apparently reluctant to increase capacity and wage pressures in the sector continuing to ease
