The RBA are to decide on rates today in which the consensus remains one-sided for the central bank to maintain the Cash Rate Target at the record low 1.50%. This has been reflected in ASX 30-day Interbank Cash Rate Futures which price in 100% expectations for the RBA to remain on hold, while the respective implied yield curve suggests the central bank is likely to stay on pause throughout the entire year with February 2019 the earliest in which the curve is leaning more towards a 25bps hike.
The case for the RBA to maintain policy settings has been supported by the ongoing backdrop of soft wage growth and below-target inflation in Australia, which has also spurred banks to revise their 2018 rate hike forecasts with ANZ Bank dropping calls for 2 hikes this year and now sees rates to be kept unchanged, while NAB has cut its forecasts to 1 hike late this year v Prev. estimate of 2 hikes. In addition, the most recent employment data and capex figures were somewhat inconclusive with Employment Change better than expected but which was solely due to Part-Time jobs, while Private Capex missed estimates although this was accompanied by upward revisions to the prior and the 2017-2018 estimate.
Elsewhere, the rhetoric from the RBA continues to suggest the bank is in no rush for policy changes as Governor Lowe stated that the most likely next move in rates is up but added that he doesn’t see a strong case for near-term policy adjustment. Governor Lowe was also somewhat blasé on the currency as he commented that AUD is manageable on a trade weighted basis and that he would prefer a lower AUD than higher, but ‘we are where we are’. Furthermore, the minutes from the prior meeting and the RBA Quarterly Statement of Monetary Policy haven’t provided any signals of a near-term change in the status quo as the central bank stuck to its usual rhetoric regarding the adverse effects of an appreciating AUD, while it also maintained its growth and inflation forecasts.
The rate decision is scheduled for 0330GMT/2230EST/1130HKT, although the market reaction to the announcement is expected be light given that a hold in rates is widely seen to be a forgone conclusion. Meanwhile, focus will turn to the accompanying statement for any clues of future policy and the central bank’s tone regarding the economy and inflation.