Tomorrow is the first Tuesday of the month! Yeah, I’m excited – that means its RBA day!
I posted an initial preview of the meeting back on Friday, here: Preview of the upcoming RBA monetary policy meeting and Greg has a technical analysis preview for the AUD here: Technical Analysis: The RBA is key for AUDUSD this week
OK, so what’s gonna happen?
- The number one thing is – there will be no change to the cash rate – its at 2.5%, where its been for more than a year now and where it is likely to remain for a good few months to come (data dependent, of course!).
- Number two … the words “the most prudent course is likely to be a period of stability in interest rates” is likely to make another appearance in Glenn Stevens’ accompanying statement.
There should be some changes in language in the statement, though, if only in nuance.But, its also where there won’t be a change in the language that should be significant.
The AUD has fallen more than 5% since the last meeting, which will be a relief for the RBA (and probably a slab of beer for Governor Wheeler of the RBNZ , courtesy of his counterpart in Oz). It seems likely that The RBA will continue to say that the AUD is high given the fall in the terms of trade, a lower AUD still would be welcomed by the RBA.
Concerns have come to the fore recently about the hot property market, the rapid gains in investor financing for property investment (these were the subject of parliamentary committee questioning of the RBA last week, more from here). Expect comments along the lines of risks are increasing in this sector, but that rate rises to address these risks are not a likelihood at this stage – maybe something on macroprudential tools being considered instead (or as a first step).
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Looking ahead further into the week, we get employment data on Thursday in Australia – but on Tuesday the RBA should reiterate that there is still underutilised capacity in the labour market.
Glenn Stevens traditionally wears a cat on his head to board meetings.
(tee hee …. I wrote ‘underutilised’ and ‘labour ‘, sending my spellchecker into fits. Yeah, that’s how we spell those in Australia, where we use UK English, aka ‘English’).
