Prospects for the RBA will depend on jobs

A Happy New Year to our readers. This is the first Australian Markets Weekly for 2017 and as always, questions, feedback and comments are gratefully received.

Regards the Australian Market Economics Team

Ivan, David and Tapas 

• Today’s Weekly provides our preliminary Q4 inflation forecast (we will finalise our forecasts later this week in a full preview note) and where we think the RBA cash rate will be headed in 2017.
• For Q4 CPI (out Wednesday week, 25 Jan) our preliminary forecast sees Headline CPI at 0.9% q/q and 1.8% y/y. While this higher headline rate will keep the RBA on the sidelines in Feb, we maintain our view the RBA is likely to cut rates later in 2017.
• Prospects for the RBA will be driven by the labour market outlook where the RBA already harbors “considerable uncertainty about the momentum”. This notion was also emphasized by former Board member John Edwards in a recent opinion piece.
• Finally, within are updated FX forecasts from our strategists. Our FX forecasts for the AUD are unchanged since our pre-year-end update in mid-December, with the major exception being AUD/GBP as hard Brexit fears mount.

For full analysis, download report:

• Australian Markets Weekly: 16 January 2017 (PDF, 436kB)