Analysts at National Australia Bank (NAB) offer a sneak peek at what to expect from the upcoming Reserve Bank of Australia’s (RBA) interest rate decision due to be announced at 0430 GMT.
Key Quotes:
“The RBA Board is certain to keep the cash rate on hold this Tuesday. Not even a single basis point hike is priced in by the market, a reflection of the Bank’s clear willingness to wait for a meaningful lift in wages growth and inflation and in no mood to cut either. Consistent with this, Governor Lowe’s comments at last week’s ECB Central Banking Forum noted three options for central banks faced with low wages growth and inflation:
1) More stimulus – lower interest rates, do more QE etc.
2) Accept inflation will be a bit lower than desired and allow a gradual return to target.
3) Try and lift inflation expectations – in theory this will also lift actual inflation outcomes.
The RBA is strongly aligned to the second option. It’s a data dependent, wait-and-see approach, though markets are likely to be alert to any changes on
International trade policy and potential spill overs,
Local housing developments,
And the ever-rising price of oil.
For any suggestions of a more dovish monetary policy tilt.”
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