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MNI STATE OF PLAY: Jobs and Inflation Outlook Key For RBA

MNI (Sydney)
SYDNEY (MNI)

The Reserve Bank of Australia is near certain to leave its monetary policy settings unchanged Tuesday, with the accompanying statement set to be the key focus as it's scoured for any tweaks to the central bank's upbeat pre-Christmas outlook for the economy.

With no change expected in the main policy levers, what Governor Philip Lowe lays out in his statement will be closely eyed. However, as Lowe speaks again on Wednesday, before offering parliamentary testimony on Thursday and then presenting the RBA's Statement on Monetary Policy on Friday, overall clarity on the bank's outlook could take until the end of the week to shine through.

OUTLOOK

Recent economic indicators have been positive, with the unemployment rate falling 2 percentage points to 6.6% in December, with the participation rate higher and 50,000 jobs created.

Inflation data released last week for the last quarter of 2020 showed a 0.9% year on year rise in the CPI, a little higher than the 0.7% which was expected. Ahead of Christmas, there was some sense that the RBA could even up its overall 2021 outlook targets.

Against these positive signs, the RBA is weighing the unwelcome appreciation in the aussie dollar, now at US76 cents after a continual rise from US57 cents in March 2020.

The central bank will also be highly aware that the Australian Government's flagship fiscal policy, the AUD86 billion JobKeeper scheme, which pays employers to keep workers on their books, expires at the end of March.

Policymakers slashed rates to 0.1% last year, introduced a program targeting maintaining the yield on the 3-year government bond and an AUD 100 billion bond buying plan expected to run until May.

While there is no expectation of an imminent change in rates – RBA policymakers have been dismissive of a move to negative rates -- interest centres on the RBA's plans for its QE program and whether it will be extended beyond May.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com

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