This via HSBC on the Reserve Bank of Australia decision and statement following the July 4 monetary policy board meeting
(In brief, any bolding mine)
- neutral tone of the post-meeting statement ... Unlike a number of other central banks that have turned hawkish in recent weeks ... the RBA maintained a clear neutral stance.
- statement was similar to last month
- Despite the improving labour market numbers, the RBA stuck by its previous phrasing of 'indicators of the labour market remain mixed' and that wages growth remains low and 'that this is likely to continue for a while yet'
- statement provided no new forward guidance or hints that the RBA may consider lifting rates any time soon ... The RBA tends to provide less active forward guidance than many other central banks
- we think the RBA should now be completely re- affirmed that it will not need to cut further
- a hike is still likely to be some time away
- statement ... noted that GDP had slowed in Q1, but that this was 'as expected' and partly reflected 'temporary factors'. The statement also dropped the reference to growth being expected to lift to 'a little above 3%' in the next couple of years, but still noted that the 'Australian economy is expected to gradually strengthen'.
- The reference to a still mixed labour market almost certainly refers to weak wages growth, rather their reading of the recent employment figures
HSBC conclude:
- So, what is needed to get the RBA to think about lifting its cash rate? In our view, the answer is a pick-up in wages growth. Once there are signs that wages growth is past its trough, we expect that it won't be long before the RBA is lifting its cash rate.
