RBA to keep rates unchanged but downgrade growth forecasts
Fundamental Forex Analysis

RBA to keep rates unchanged but downgrade growth forecasts

The Reserve Bank of Australia (RBA) will keep interest rates unchanged at 0.75% on Feb. 4. The central bank, however, will downgrade growth forecasts, supporting the case for monetary easing in time, analysts at ANZ Bank mentioned in their weekly macro note. 

Key quotes

With its cash rate close to the stated lower bound of 0.25%, we think the RBA will take the opportunity provided by strong employment data to keep the cash rate as is and wait for further information about the state of the domestic and global economies.

The forecasts will support the case for further monetary support in time, however. We think the RBA will wait for more information before moving, which is similar to the approach it took in May and August of last year. In our view, April looks likely to be the month of the next move.

We expect the RBA to cut its growth forecasts by 1?4ppt for Q4 2019, and Q2 and Q4 2020 (Figure 1), taking through-the-year growth to 2% for 2019 and 21?2% for 2020. Further out, we expect the GDP forecasts to sit at 3% as before.

With the December quarter CPI data largely as the RBA expected, we also expect no change to the inflation forecasts.

 

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