At 0130GMT today we get the Reserve Bank of Australia's quarterly Statement on Monetary Policy
Recent comments from Governor Glenn Stevens have indicated changes are afoot in the RBA's views and policy.
For example:
- While saying further cuts in interest rates remain on the table, Stevens made particular emphasis of also pointing out the longer-term risks of lower rates, danger of leverage
- Of even more note ... he said growth below 3% is new normal
- In this week's accompanying statement to the board decision, Stevens said "The Australian dollar is adjusting to the significant declines in key commodity prices", which is a big shift from what they'd be saying previously, which went along the lines of "Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices"
OK, with that background ... what about today's Statement?
- The RBA is likely to repeat their outlook as one of ongoing below-trend growth
- Spare capacity likely to remain in the economy for some time
- But the bank is likely to revise down its unemployment forecast (perhaps to 6.25%), but not significantly alter is projection for an extended period of elevated unemployment
- The inflation forecast was revised lower 3 months ago (for underlying inflation to centre around 2.25% in 2016), expect no change in this today
- Optimism on global growth, but concerns still around the risks for China
- A potential for the bank to downgrade growth forecasts again, especially given Q2 was a softer period for growth. Stevens hinted at this (see opening bullets, above ... more at those links). (Growth forecasts are currently 2.5% for 2015 & 3.25% for 2016 ... down from 2.75% & 3.5% in the February Statement.)
Implications for the monetary policy:
- Downward revisions to expected growth are unlikely to shift the bank closer to another cut
more to come
