RBA: Neutral stance as wait and see - TDS

Research Team at TDS, suggests that the market consensus assumed unchanged GDP and inflation projections for the today’s RBA Statement on Monetary Policy after the RBA paused again at 1.5% earlier this week.

Key Quotes

“In the end, we see the Bank’s ‘neutral’ stance as wait and see (rather than the overnight BoE-neutral “next move could be up or down”) as uncertain(ty) appears 27 times, with a laundry list of uncertainties that relate to China, the U.S. election and rates cycle, commodity prices, and domestically, the labour market and consumption. The inflation outlook is uncertain given how long policy has been so accommodative globally, as well as domestically. 

GDP growth expected to last longer at 3% before lifting to 3½% for H2 2018. The inflation profile was left unchanged at 1.5% this year and 2% for 2017/18.  What is new, is Bank research claiming that “the boost to the prices of tradable items from the earlier depreciation of the exchange rate appears to have largely run its course”. 

Aussie Q3 retail sales volumes at -0.1% (vs prior qtr +0.3%) posed a concern to the market, with trade already a bit of a drag, adding downside to our +0.4%/qtr GDP forecast. The main contributors to this fall were food retailing (-0.7%) and department stores (-3.6%).”