RBA says no strong case for a near term change in cash rate

Author: Eamonn Sheridan | Category: Central Banks

This is the RBA Statement on Monetary Policy, SoMP

  • Board does not see strong case for near-term change in cash rate
  • says its outlook for inflation and unemployment mean higher interest rates likely at some point
  • says GDP growth to be above trend over forecast period, inflation forecasts revised up slightly
  • forecasts year-average GDP growth at 3.5 pct for 2018, 3.25 pct for 2019, 3.25 pct for 2020
  • forecasts underlying inflation at 1.75 pct dec 2018, 2 pct June 2019, and 2.25 pct from Dec 2019 to Dec 2020
  • forecasts unemployment rate at 5 pct in June and Dec 2019, 4.75 pct in June and Dec 2020
  • RBA says labour market stronger than expected, leading indicators suggest momentum could be sustained
  • says stronger growth and labour mkt expected to generate gradual rise in wages, inflation
  • says board assessing impact of slow growth in household income amid high debt, falling house prices
  • says overall effect of higher money mkt rates on banks' funding costs and profits has been fairly small
  • says possibility of escalating trade protectionism presents a significant risk to global growth
  • says many Asian economies could be affected by US-China trade tensions because of supply chain impact
  • says demand clearly slowed in Sydney, Melbourne housing with prices continuing to decline steadily
  • says non-mining investment has grown strongly, mining investment likely to reach trough late 2018/early 2019
  • says it appears dwelling investment is close to its peak in current cycle
  • says housing credit conditions have tightened, and demand for credit has also slowed
  • says trade-weighted a$ contained by offsetting forces of rising commodity prices, declining yield differential
  • any AUD depreciation amid stronger global inflation and/or demand positive for growth and inflation outlook
Quick headlines from the Statement via Reuters  

OK, loads of headlines distilled from the complete text of the policy, distilling a little further:
  • GDP and CPI forecasts nudged a little higher
  • Unemployment rate forecast a little lower
  • but no case for a near term policy move on the cash rate
  • the usual risks noted
No near term cash rate move will not surprise many at all. Bank appears well and truly on hold given the data flow. 

AUD down a few tics. Little change. 

For background, the previews:

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