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RBA Review - July 2020: Glass Half Full, But Still Cognisant Of The Downside.

MNI (London)

MNI Point of View:

We were expecting a relatively vanilla statement alongside the Reserve Bank Australia's latest monetary policy decision, but the outcome was even blander than our very modest expectations.

There was no surprise as the Bank left its policy settings unchanged, reaffirming its forward guidance and its pledge to act, if required.

At the time, we noted that the first skim of the statement revealed very little to rock the boat. Its assessment re: the international situation was a little more upbeat as it noted that "Leading indicators have generally picked up recently, suggesting the worst of the global economic contraction has now passed." Although it still cautioned that "despite this, the outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the coronavirus."

The Bank also noted the current economic hardships, while highlighting that "conditions have, however, stabilised recently and the downturn has been less severe than earlier expected. While total hours worked in Australia continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely. There has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions in most of the country."

On net this alludes to a slightly less downbeat assessment when the Bank releases its updated economic projections in early August, which falls in line with the recent guidance from senior Bank officials. Although, a wider perusal of the statement reveals that it has tipped its hat to both the realised and potential sources of risk.

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