I posted this from Barclays overnight: RBA meeting yesterday - responses
This now, via Westpac (in brief):
There are very few significant changes in the Governor's statement relative to the statement in October.
- On the positive side ... Governor has chosen to point out that prospects for non-mining business investment have improved "with the forward looking indicators being more positive than they have been for some time"
retail sales reports
- We were interested in how the Governor would assess the outlook for household consumption. In the event, all he did was point out that it was "one continuing source of uncertainty".
There was also a disappointing inflation report since the last meeting
- the statement only notes that "inflation remains low and is likely to remain so for some time". However, the Governor repeats the Bank's central forecast for "inflation to pick up gradually as the economy strengthens".
There has also been clear further deterioration in the Sydney housing market
- At this stage, the Bank is comfortable to note that "housing market conditions have eased further in Sydney", without speculating about future dynamics.
the Governor has chosen to maintain his measured description of the labour market, "the labour market has continued to strengthen".
- He also repeats that some lift in wages growth can be expected over time.
- While we expect that the forecasts for the unemployment rate in Friday's Statement on Monetary Policy will remain at 5.5%, there is a chance that the forecast for 2019 will be reduced to 5.25%.
Since the last Board meeting, the AUD had depreciated from USD 0.788 to USD 0.768.
- Despite this welcome move, the Bank repeats its warning that "an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast".
Today's statement repeats the neutral bias language of recent statements.
There remains a difference of opinion between us and the Bank on the growth and inflation outlook.
- The Bank is expecting above-trend growth next year despite uncertainty around the household sector and with the associated closing of the output gap along and a gradual move towards full employment, they will continue to forecast inflation moving back to 2½ per cent in 2019.
- We accept that if that dynamic does come to pass, then the Bank will see opportunity to raise rates next year. However, our growth outlook is much flatter, particularly given our view on household incomes and wages, we do not expect that the need will arise to raise rates in 2018.