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5 Aug 2014
RBA preview: Sitting on its hands again - Nomura
FXStreet (Bali) - According to Charles St-Arnaud, Australian Economist at Nomura, today's RBA monetary policy decision will keep a neutral stance, however, the forecast revision could see weaker growth and higher inflation.
Key Quotes
What caught our attention in the last meeting was the increase in the level of discomfort regarding the currency, by adding the last part to the following statement: “The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy”. While AUD is lower than at the time of the July statement, we think it likely that the RBA will reiterate its discomfort about the level of the currency.
Indicators received since the July meeting have been relatively mixed. As a result, we believe that the RBA's policy stance remains firmly neutral and expect the central bank to leave monetary policy unchanged at next week‟s meeting. Moreover, we think the statement will continue to suggest that the RBA is not considering any changes to its policy stance and will very likely reiterate that “the most prudent course is likely to be a period of stability in interest rates”. We continue to believe that the RBA will keep monetary policy unchanged this year and that the first hike will occur in H1 2015.
In addition, the RBA will be publishing their Statement on Monetary Policy on 8 August. We believe that the RBA could revise its growth outlook slightly lower to take into account the impact of the budget on disposable income. Moreover, we believe that it will also increase its expectation for underlying inflation as a result of the higher starting point, given the upside surprise from the trimmed-mean measure in Q2.
Key Quotes
What caught our attention in the last meeting was the increase in the level of discomfort regarding the currency, by adding the last part to the following statement: “The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy”. While AUD is lower than at the time of the July statement, we think it likely that the RBA will reiterate its discomfort about the level of the currency.
Indicators received since the July meeting have been relatively mixed. As a result, we believe that the RBA's policy stance remains firmly neutral and expect the central bank to leave monetary policy unchanged at next week‟s meeting. Moreover, we think the statement will continue to suggest that the RBA is not considering any changes to its policy stance and will very likely reiterate that “the most prudent course is likely to be a period of stability in interest rates”. We continue to believe that the RBA will keep monetary policy unchanged this year and that the first hike will occur in H1 2015.
In addition, the RBA will be publishing their Statement on Monetary Policy on 8 August. We believe that the RBA could revise its growth outlook slightly lower to take into account the impact of the budget on disposable income. Moreover, we believe that it will also increase its expectation for underlying inflation as a result of the higher starting point, given the upside surprise from the trimmed-mean measure in Q2.