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Free Access**MNI 5 Things: RBA Tad More Dovish Despite Labor Mkt Optimism
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:
--The RBA left the cash rate on hold at 1.5% as expected by both the
markets and the economists. This is the 21st straight meeting that the cash rate
has been left unchanged. The RBA also repeated the outlook that "further
progress in reducing unemployment and having inflation return to target is
expected, although this progress is likely to be gradual."
--The statement overall was slightly more dovish despite optimism on the
labor market, and the RBA pointing to higher commodity prices and the recent
depreciation of the Australian dollar. The RBA said a gradual decline in the
unemployment rate is expected, after being steady at around 5.5% for much of the
past year. The RBA said the exchange rate has depreciated a little but remains
within the range of the past two years. In line with this, the RBA omitted the
line, "An appreciating exchange rate would be expected to result in a slower
pick-up in economic activity and inflation than currently forecast" which
suggests concerns about appreciation have waned.
--On the downside, the RBA said financial conditions are becoming less
expansionary in some countries. The RBA also pointed to rise in short-term
wholesale interest rates in Australia due to developments in the U.S. and also
other factors. The RBA said it remains to be seen the extent to which these
factors persist, which indicate this is becoming a worrying development.
--The RBA also softened language around the housing market. It noted that
conditions in the Sydney and housing markets have eased and prices have
declined. Previously it only pointed to slowing in housing markets in these two
main cities. The RBA also said some further tightening of lending standards by
banks is possible but reminded once again that the average mortgage interest
rate on outstanding loans has been declining for some time.
--The RBA pointed to uncertainty from the direction of international trade
policy in the U.S. but only mentioned in terms of global outlook. In case of
emerging market economies, the language was less worrying with the RBA saying
there have been some strains but largely for country-specific reasons.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
[TOPICS: MMLRB$,M$A$$$,M$L$$$,MT$$$$]
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.