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3 Mar 2015
RBA to act on strong easing bias in April - ANZ
FXStreet (Bali) - According to ANZ Economists, while holding rates at 2.25% today, the RBA retains a strong easing bias, now expecting them to act on this easing bias at the next meeting in April.
Key Quotes
"The RBA retains a strong easing bias using the terminology of ‘time being’ and indicating that ‘further easing of policy may be appropriate over the period ahead’. We believe they will act on this easing bias at the next meeting in April."
"The Statement highlights concerns about non-mining growth momentum and the potential for further upward pressure on the unemployment rate: “the economy is likely to be operating with a degree of spare capacity for some time yet”."
"There are few concerns about inflation, confident that despite a lower exchange rate inflation will remain within the 2-3% target for the next few years."
"The Governor’s Statement continues to point out that the Australian Dollar (when measured against a basket of currencies) remains above its fundamental value and that a lower currency is required for the economy to achieved ‘balanced growth’."
"Importantly, the RBA Board note risks associated with the effect of low interest rates on the housing market. The Statement makes two points on this; strong house price gains and investor activity is mainly an issue in the Sydney market and that they will work with other regulators (presumably APRA) to attempt to mitigate the risks to the financial system and the broader economy."
"A sustained non-mining recovery remains elusive, dependent on new investment outside of the property and construction sectors. Over the medium-term, the currency is critical and there is little evidence that it is having the desired positive impact on investment decisions and employment as yet. Right now, business surveys and the ABS capital expenditure intentions survey suggest that we are unlikely to see strong enough investment to keep unemployment stable (or indeed, take it lower) in the next 12 to 18 months. As such, further easing from the RBA remains a high probability."
Key Quotes
"The RBA retains a strong easing bias using the terminology of ‘time being’ and indicating that ‘further easing of policy may be appropriate over the period ahead’. We believe they will act on this easing bias at the next meeting in April."
"The Statement highlights concerns about non-mining growth momentum and the potential for further upward pressure on the unemployment rate: “the economy is likely to be operating with a degree of spare capacity for some time yet”."
"There are few concerns about inflation, confident that despite a lower exchange rate inflation will remain within the 2-3% target for the next few years."
"The Governor’s Statement continues to point out that the Australian Dollar (when measured against a basket of currencies) remains above its fundamental value and that a lower currency is required for the economy to achieved ‘balanced growth’."
"Importantly, the RBA Board note risks associated with the effect of low interest rates on the housing market. The Statement makes two points on this; strong house price gains and investor activity is mainly an issue in the Sydney market and that they will work with other regulators (presumably APRA) to attempt to mitigate the risks to the financial system and the broader economy."
"A sustained non-mining recovery remains elusive, dependent on new investment outside of the property and construction sectors. Over the medium-term, the currency is critical and there is little evidence that it is having the desired positive impact on investment decisions and employment as yet. Right now, business surveys and the ABS capital expenditure intentions survey suggest that we are unlikely to see strong enough investment to keep unemployment stable (or indeed, take it lower) in the next 12 to 18 months. As such, further easing from the RBA remains a high probability."