Menu

Search

  |   Commentary

Menu

  |   Commentary

Search

RBA monetary policy: Assessing future bias

Reserve Bank of Australia (RBA) chose to keep the interest rate unchanged at 1.5 percent.

Let’s look at the details of policy announcement to assess the bias of RBA.

Key highlights –

  • RBA notes that there was a broad-based pick-up in the global economy in 2017. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. Growth has also picked up in the Asian economies, partly supported by increased international trade. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth. (Mild hawkish bias)
  • According to RBA, the pick in that global economic activity has pushed oil and other commodities price higher, however, RBA expects Australia’s terms of trade to decline over the next years but remain at high level.  (Neutral bias)
  • Recent data suggests at around its trend of the September quarter. Growth is expected to be around 3 percent over the next few years. Business conditions at a high level and capacity utilization have risen. The outlook for non-mining business investment has improved, with the forward-looking indicators being more positive than they have been for some time. Increased public infrastructure investment is also supporting the outlook. Low level of household consumption remains a concern. Household incomes are growing slowly and debt levels are high. (Neutral bias)
  • Employment growth has been stronger, and employment increased in all states. Various forward-looking indicators still point to continued growth in employment over the period ahead. Wage growth low though stronger conditions in the labor market should lift wages somewhat over time. There are reports that some employers are finding it more difficult to hire workers with the necessary skills. (Neutral bias)
  • Globally, inflation remains low, although higher commodity prices and tight labor markets are likely to see inflation increase over the next couple of years. Long-term bond yields have risen but are still low. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus. Financial conditions remain expansionary, with credit spreads narrow. (Neutral bias)
  • The Australian dollar is trading within a range for the past two years. Stronger Aussie likely to lead to a slower pick-up in economic activity and price pressure than the current forecast. (Neutral bias)
  • Nationwide measures of housing prices are little changed over the past six months, with prices having recorded falls in some areas. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures. Tighter credit standards have also been helpful in containing the build-up of risk in household balance sheets. (Neutral Bias)
  • Low-interest rates supporting the economy. RBA expects gradual progress in unemployment reduction and inflation pick up.

There have been minor tweaks in this month’s statement; it basically remains same in tone and neutral in terms of future bias.  We expect RBA to maintain stance and keep policy unchanged in the first half of this year and for the whole year if inflation fails to rise.

The Australian dollar is little changed largely due to the neutrality in the monetary policy statement. The Australian dollar is currently trading at 0.787 against the dollar.

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest

 

 

  • ET PRO
  • Market Data

Market-moving news and views, 24 hours a day >

February 19 13:00 UTC Released

RUReal Wages YY

Actual

6.2 %

Forecast

4.6 %

Previous

4.6 %

February 19 13:00 UTC Released

RURetail Sales YY

Actual

2.8 %

Forecast

3 %

Previous

3.1 %

January 31 00:00 UTC 2831728317m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 31 00:00 UTC 2831728317m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 22 19:00 UTC 4013740137m

ARTrade Balance

Actual

Forecast

Previous

-1541 %

January 31 00:00 UTC 2831728317m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 22 19:00 UTC 4013740137m

ARTrade Balance

Actual

Forecast

Previous

-1541 %

January 31 00:00 UTC 2831728317m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 31 00:00 UTC 2831728317m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 31 00:00 UTC 2831728317m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.