MNI 5 Things:RBA Statement Little-Changed But Some Upside Risk

By Sophia Rodrigues

     SYDNEY (MNI) - Following are the five key observations we made from the

Reserve Bank of Australia's cash rate decision on Tuesday:

     --There were very few changes in the statement compared to the one last

month, despite this statement incorporating updated forecasts prepared for the

quarterly Statement on Monetary Policy. One important line in the statement was

for the central forecast for growth to pick up to average a bit above 3% in 2018

and 2019 and "this should see some reduction in spare capacity in the economy."

The inclusion of the comment on spare capacity suggests an upside risk to

monetary policy.

     --The RBA stated that the price of oil and some base metals has increased

recently. This could indicate some small upward revision for terms of trade

though the basic profile for decline over the next few years remains unchanged.

Oil price rise would also pose an upside risk for inflation.

     --The RBA said recent inflation data were in line with expectation and

maintained the central forecast for inflation to be bit above 2% in 2018. There

was no hint of inflation forecast for 2019 and this will be known on Friday when

the quarterly policy statement is released.

     --The RBA maintained the outlook for employment growth despite

acknowledging a slowing over recent month. The RBA reiterated that various

forward-looking indicators continue to point to solid growth in employment in

the period ahead, with a further gradual reduction in the unemployment rate

expected.

     --The RBA didn't incorporate guidance on monetary policy in the cash rate

statement. But overall the statement suggests the risk for cash rate hike is for

earlier, rather than later.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

[TOPICS: MMLRB$,M$A$$$,M$L$$$,MT$$$$]