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Free AccessMNI BRIEF: China November PMI Rises Further Above 50
MNI US Macro Weekly: Politics To The Fore
REPEAT:MNI STATE OF PLAY:Upside RBA Investment Narrative Risk
Repeats Story Initially Transmitted at 05:47 GMT Dec 4/00:47 EST Dec 4
By Sophia Rodrigues
SYDNEY (MNI) - The Reserve Bank of Australia is expected to leave the cash
rate unchanged for the 15th meeting in a row, with the accompanying statement
expected to be similar in most respects to the month before.
The RBA's cash rate decision is due Tuesday at 14:30 local time (0330 GMT).
All economists in an MNI survey and virtually all market players expect the rate
to be left unchanged at 1.5%.
The overall statement could appear a bit more positive than October because
any new discussion would center around the growth outlook and non-mining
business investment. But that doesn't mean the slight downside risk to monetary
policy has diminished.
One key change in Tuesday's statement could be comments about growth, as
the RBA may appear more confident about the forecast it made last month for
economy to pick up and growth to average around 3% over the next few years. The
more important change could be on non-mining business investment, where the RBA
could note the recent improvement and point to further upside risk.
The main offset is likely to come from continued concerns about outlook for
household consumption and low inflation.
The RBA may point to lower-than-expected Q3 wage price data but express
confidence about prospects for a pickup in wage growth as the labor market slack
declines. Indeed, given Governor Philip Lowe has admitted that managing wage
expectations is one of the strategies he is following, it is likely the RBA
could repeat the line that "stronger conditions in the labor market should see
some lift in wage growth over time."
The commentary on inflation is likely to be truncated given there has been
no fresh inflation data. The RBA can be expected to reiterate its view that the
"central forecast remains for inflation to pick up gradually as the economy
strengthens."
These comments might, however, mask the concerns the RBA has about a wage
pickup even as the unemployment rate moves closer to full employment, and the
extent wage gains pass through to overall inflation. How wage inflation develops
may play a bigger role in how monetary policy evolves in the coming year and,
for now, risks still remain slightly to the downside.
The RBA is likely to maintain its narrative on the Australian dollar
despite recent weakness. Any further fall in the exchange rate would be a
development the RBA welcomes and therefore it will remind that "an appreciating
exchange rate could be expected to result in a slower pick-up in economic
activity and inflation than currently forecast."
There's unlikely to be any change in the discussion on the housing market
or the global economy.
The last paragraph is expected to be left intact: "The low level of
interest rates is continuing to support the Australian economy. Taking account
of the available information, the Board judged that holding the stance of
monetary policy unchanged at this meeting would be consistent with sustainable
growth in the economy and achieving the inflation target over time."
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
To read the full story
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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.