Credit Agricole: RBA on hold; to continue with its FX rhetoric.
The RBA will leave rates on hold and after upgrading its rhetoric to be more upbeat on global and local growth last month, in line with its forecast revisions for the SoMP, the RBA is not likely to change its rhetoric so soon again. Indeed, the RBA will continue to indicate a reluctance to cut or raise rates. While RBA Governor, Philip Lowe, recently said that he would like the currency to be lower, he also said that it is hard to say that the currency is fundamentally overvalued. So the RBA is likely to continue with its rhetoric that currency appreciation complicates the rebalancing of the economy.
BofA Merrill: No change this week but next move in rates likely up in 2018.
We now see a more compelling case for the RBA to begin normalizing policy next year taking into account stronger-than-expected GDP data and improved economic prospects. There has been a notable change in tone from the RBA this year as downside risks have abated. The Bank’s confidence that the GDP would rebound from a weak reading in 3Q has been justified. We now see growth moving above trend into 2018 and look for inflation to get back into the target band faster than previously thought. So we have penciled in the start of a move to normalize policy in February and August 2018 that would unwind the two rates cuts seen over 2016. However, it is too early to expect any guidance from the Bank that a shift in bias is imminent when the board meets this week.
Barclays: RBA on hold; AUD vulnerable to a correction in equities.
Against the backdrop of a strong bounce-back in growth, higher commodity prices and relatively benign inflationary pressures, we expect the RBA to keep rates unchanged on Tuesday. Considering that RBA Governor Lowe sounded more confident about the domestic economic outlook and has signalled that the bank remains comfortable staying on hold in his recent speeches, we believe that the RBA statement will neither display urgency to ease further nor signal a shift to a tightening bias. We think the key downside risk for the AUD in the near term will likely come from a correction in US equities or iron ore prices.
NAB: RBA to stand pat and remain neutral in statement.
As for the RBA, all economists surveyed by Bloomberg expect the Bank to stand pat. Nevertheless, the market will be paying close attention to the language in the Governor’s Media Release to see whether last week’s December quarter GDP had any material bearing on the Bank’s thinking. We don’t think so, indeed, we expect the Bank to remain neutral with the final paragraph in the Governor’s statement assessing current monetary policy settings as consistent with the Bank’s policy mandates.
ANZ: RBA policy bias is likely to remain unmoved.
There has been a lot of new information for the RBA to absorb since its last board meeting, and while much has changed, its policy bias is likely to remain unmoved as the balancing act becomes ever more challenging. On the more hawkish side of the ledger we have seen some improvement in the growth pulse, a decent rise in household consumption, a fall in the savings rate and a re-acceleration in activity in the housing market – particularly in Sydney. However, this was offset by further disappointment on the wages front – an unwelcome development in an environment where inflation pressures are already notably absent.
Westpac: RBA on hold but next move in rates likely down in 2018:
We can be certain that the decision from the Board will be to hold rates steady. With the economy slowing and macro prudential policies further tightening housing markets, the risk to rates in 2018 will be to the downside not the upside – as currently expected by markets.
RBC: RBA to leave the statement with a neutral tone.
Having just refreshed its forecasts as part of its February communication, we do not expect much policy signal from the RBA. Global growth looks increasingly robust, the terms of trade have held their recent gains, and Q4 domestic growth was almost ½%pt better than its estimate. We expect this to leave the statement with a neutral tone.
HSBC: On hold, with no appetite for further easing.
In recent public testimony Governor Lowe has made it abundantly clear that the RBA has no appetite to cut further Governor Lowe has stated that it would not be in the ‘public interest’ to cut again if it drove household debt to rise further We expect the RBA’s to keep its cash rate on hold at 1.50% through 2017, before lifting it in early 2018.
Credit Suisse: RBA on hold before easing further in 2018.
The RBA is expected to keep rates unchanged. We remain of the view that the RBA will ease further over the next year due to slack in the labor market, sluggish credit growth, and reduced prices in the housing market caused by oversupply. We see the optimal cash rate below 1%.
Unicredit; RBA meeting uneventful; prefer long AUD vs GBP, NZD.
The RBA meeting is very likely to be uneventful with the cash-rate target left at 1.5% and the statement broadly unchanged compared to the last one in February… Fundamentally, we remain AUDUSD constructive because of the ongoing global demand upswing, but in the near term our conviction for the pair’s direction is low, especially since iron ore prices seem to be still in the midst of a short-term correction. We prefer to remain positioned for AUD upside against NZD and GBP.
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