The Reserve Bank of Australia (RBA) will deliver its April interest rate decision later this afternoon.
With economists and markets united in the view that the cash rate will remain at 1.5%, all attention will yet again fall on the bank’s accompanying monetary policy statement, particularly the tone offered towards Australia’s labour and housing markets.
Here’s the state of play.
- No one expects the cash rate will move today. All 26 economists polled by Bloomberg expect it will remain steady at 1.5%. Cash rate futures also reflect that view, pricing a 100% probability that there’ll be no move in either direction today.
- Given that expectation, all attention will understandably fall on the bank’s monetary policy statement.
- The RBA will almost certainly offer a neutral bias on the outlook for interest rates in the final paragraph of the statement, an outcome that will further cement expectations that they’ll be on hold for the foreseeable future.
- It’s likely to repeat the phrasing used in March that “taking account of the available information the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”.
- After a series of out-of-cycle mortgage rate increases from Australian lenders, along with further restrictions and greater oversight of interest-only lending from APRA and ASIC, the bank’s language on housing market conditions will likely change.
- In March, it said that “supervisory measures have contributed to some strengthening of lending standards”. It also noted that investor borrowing had “picked up over recent months”.
- Markets will be paying extra attention to the views offered towards housing, particularly as many believe ongoing strength in Sydney and Melbourne prices is preventing the bank from lowering rates to boost activity in other parts of the economy.
- Given February’s weak Australian labour market report, released after the board last met in March, its view on the labour market may also reflect heightened levels of caution.
- Previously it said that labour market indicators “continue to be mixed” with “considerable variation in employment outcomes across the country”.
- With Australia’s unemployment and underemployment rates spiking higher in February, indicating that elevated levels of labour market slack persist, this may lead to a tweak in language towards not only the outlook for employment growth but also wage growth and inflation.
- On the latter, it said in March that “inflation remains quite low” with “growth in labour costs remaining subdued”, noting that “underlying inflation is likely to stay low for some time”.
- It may also touch upon the weakness in retail sales reported in February, especially given the bank’s forecasts for an acceleration in economic growth are partially underpinned by an expected lift in household consumption ahead.
- With the Australian dollar largely unchanged in trade-weighted terms from when the board last met, and with the bank’s commodity price index also steady in March, its view that an appreciating exchange rate would “complicate” the economy’s transition is likely to be repeated.
The RBA rate decision and monetary policy statement will be released at 2.30pm AEST.
Business Insider will have all details once it hits the screens.
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