Later this afternoon the Reserve Bank of Australia (RBA) will deliver its second monetary policy decision of 2016, with almost all attention likely to be on policy statement rather than the actual rate decision.
Here’s the state of play.
- March has not traditionally been a month where the RBA moves rates. Over the past 20 years, rates have only moved on four occasions at this meeting, with two occurring during the global financial crisis.
- Markets and economists alike expect that trend to continue. Cash rate futures put the odds of a 0.25% rate cut at just 6%, while all 27 economists surveyed by Bloomberg expect the cash rate to remain at 2.00%.
- With next to no expectation that the RBA will move rates, all attention will be on the wording of the accompanying monetary policy statement, particularly towards the level of the Australian dollar, commodity prices, business investment, the labour market and the all-important final paragraph in which the bank offers its forward guidance on rates, or bias.
- The language towards the Australian dollar, in particular, will be closely scrutinised given RBA board member John Edwards recently stated that it was still “a bit too high”. “If it was driven entirely by commodity prices, it certainly should be lower,” Edwards told the Wall Street Journal in late February.
- In its February policy statement the RBA noted that “the exchange rate has continued its adjustment to the evolving economic outlook”.
- Aside from the wording on the currency, there’ll be plenty of interest on language towards business investment and the current state of the labour market given recent weakness in official data releases.
- As for the final paragraph of the statement, most expect the RBA to maintain its soft easing bias, indicating that rates are still more likely to fall rather than rise in the period ahead. “Continued low inflation may provide scope for easier policy, should that be appropriate to lend support to demand,” read the RBA’s February statement.
The RBA will release its rate decision and accompanying monetary policy statement at 2.30pm AEDT.
Business Insider will have full coverage as soon as the data drops.