RBA: Softer tone amid rising risks – Nomura

The Reserve Bank of Australia (RBA) today again left its cash rate at 1.50%, as uniformly expected, but its central case also remains unchanged; that is, it continues to forecast GDP growth “a bit above 3%” and inflation grinding slowly higher, into the 2-3% target band over time, notes the research team at Nomura.

Key Quotes

“The RBA also noted some new risks, as we anticipated, giving its press release a softer overall tone, in our view. We judge that in a somewhat more-uncertain world, the RBA does not want to add to potential instability by encouraging markets and media to speculate about the possibility of a rate hike, and view its prior communication about being a source of “stability and confidence” as consistent with this. We continue to believe the next move in cash rates is likely up, but not for some time – we forecast two 25bp rate hikes to be delivered in Q1 and Q3 2019.”

“Markets also seemed to sense that the RBA would be more cautious today and AUD and short-end rates were little affected by today’s press release. The immediate forward focus for the domestic market is the Q1 GDP data, released tomorrow, in which we and consensus look for a solid 0.9% q-o-q gain in growth. We remain long AUD/NZD.”