Analysts at HSBC offer a detailed outlook on what to expect from Reserve Bank of Australia’s (RBA) monetary policy going forward.
Key Quotes:
“It is clear that the bar for the RBA cutting its cash rate is very high. It remains our view that while the labour market still has positive momentum the RBA will be able to credibly argue that wages growth should continue to rise and that should be enough to keep them from considering cutting the cash rate.
In our view, the RBA would need to believe that the unemployment rate was set to rise materially (most likely to 5.5%) before they would consider cutting the cash rate.
Our central case is that the unemployment rate will continue to edge lower in coming quarters. This is also conditioned on our economists’ positive view on the global outlook, and particularly China.
However, if it turns out that global growth weakens more sharply, or that China has a hard landing, the RBA would clearly have considerable scope to deliver policy stimulus.”
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