From the FXWW Chatroom: RBA: No major cues
As expected, the Reserve Bank of Australia (RBA) kept its cash rate unchanged at 1.50% today. In today’s statement, the RBA did not make significant changes, with the guidance left completely unchanged.
The RBA continues to sound positive on growth, flagging that growth in 2018 will likely be stronger than in 2017, and noting that investment growth was increasing in the non-mining sector. It also noted that employment growth remains robust and, consistent with that, wage growth appears to have bottomed out. However, it continued to note that inflation will likely remain low for some time, as wage growth was still low and will only rise very gradually. There was no reference to recent trade protectionism announcements from the US, despite Australia being a primary supplier of iron ore to Asia Pacific, and could be impacted by the proposed tariffs (see Asia Pacific: US tariffs: A minor setback for now, 2 March 2018). The RBA mentioned that the housing market is slowing in Sydney and Melbourne, but household debt remains a source of vulnerability.
Overall, today’s policy decision remains broadly in line with the RBA’s existing narrative of a recovering economy and inflation returning to within the target band, a process that is expected to continue. Recent economic data has been supportive, and has not necessarily changed the RBA’s economic assessment, especially given that inflation is rising very gradually and domestic growth is showing signs of improvement. Robust global demand is a positive for the 2018 outlook, but in terms of monetary policy, we expect the RBA to raise the policy rate only in H2 18 – by 25bp at the August meeting followed by a 25bp rate hike in November (see Australia: RBA adopts ‘glass half full’ approach, 11 December 2017).
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