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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.
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Free AccessMNI PREVIEW: RBA Set To Hold, Eye Developments
The Reserve Bank of Australia will likely leave monetary policy unchanged Tuesday, looking through downside risks to the economy to take stock of earlier decisions that are seeming to have the desired effect on the economy.
Policymakers are expected to leave official interest rates on hold at a record low 0.25% for a sixth straight month and continue to target a yield of 25 basis points on the benchmark 3-year government bond, with the main focus of watchers likely to be on the accompanying statement rather than the likely decision.
In the last two months, Melbourne, Australia's second city, has been hit with a resurgence of Covid-19 infections which will have an impact on the strength of Australia's nascent recovery. Ongoing internal and external order closures are also hampering economic activity.
OUTLOOK
The RBA estimates GDP fell by 7% in the first half of 2020 -- official data will be published Wednesday -- and, with the recovery slowed by the renewed disruptions in Melbourne, the bank's baseline scenario now sees a contraction of 6% over the whole year, which will not be fully recovered until some point in 2022 after a 5% expansion in 2021.
Unemployment, which reached 7.5% in July, is forecast to rise to almost 10% over the next six months and gradually decline to around 7% by December 2022.
The RBA last cut rates by 50 basis points at an out of cycle meeting in March when it also announced a bond buying program with a target of a 0.25% on the benchmark Australian three-year government bond.
It also introduced a A$90 billion Term Funding Facility (TFF) designed to facilitate low cost lending by commercial banks to smaller businesses.
Since then the RBA has been consistent in its messaging that while the economic contraction is Australia is severe, it is not as severe as originally expected.
The bank has said that it believes its policies are being transmitted as designed, and are complementing the Federal Government's AUD259 billion fiscal stimulus package.
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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.