Australian Markets Weekly – RBA to hold the line on rates

Domestic economy still arguing for unchanged RBA policy

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  • RBA to keep monetary policy unchanged at tomorrow’s Board meeting – the key question will be whether the Bank still sees prospects for a pick-up in growth
  • Global market volatility likely makes the RBA watchful but global outlook has not materially changed
  • Australian labour market outperformance a continuing centrepiece of discussion
  • The Board has time to continue reviewing domestic economic signals as global economic/financial developments evolve
  • NAB expects the Reserve Bank to remain on hold through this year
  • Friday’s quarterly Statement on Monetary Policy likely to reveal little change in Australia’s key macroeconomic forecasts
  • Inflation continues to provide scope to ease if required. CPI forecasts to be little altered, though RBA to recognise greater exchange rate pass-through in latest quarter
  • RBA to reduce unemployment rate forecast – a key question is whether non-mining growth is stronger than recognized and/or potential growth is even lower than estimated

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