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6 Feb 2015
RBA tweaks GDP and CPI forecasts, rate cut possibility falls – TDS
FXStreet (Barcelona) - The TD Securities Research Team reviews today’s RBA’s Monetary Policy Statement, noting that the central bank’s GDP and CPI forecasts came in better than anticipated, unsupportive of any further rate cuts.
Key Quotes
“The RBA quarterly Statement on Monetary Policy revealed underlying assumptions for GDP and CPI that were barely tweaked. A closer read of the report detailed why this was the case.”
“The better than anticipated forecasts were based off market pricing, that implies a cash rate closer to 2%.”
“The Bank expects “a bit below trend” GDP growth of 2¾%/yr through to end-2015 (was 3%/yr) then climb to 3¼%/yr by mid-2016, unchanged. The new forecast is a further rise towards 3¾%/yr by mid-2017 via consumption and LNG exports, well over the accepted trend pace of 3-3¼%.”
“The Bank’s underlying inflation profile was revised down by -¼% across the board. However, we thought there might be a dip to 2%/yr near-term to justify the “haste” of Tuesday’s cut.”
“Instead, the Bank expects 2¼%/yr for mid-year (was 2½%/yr) before drifting towards mid-target 2½%/yr by year end, and remaining there through to mid-2017.”
“All up, we see little in the report to support consecutive rate cuts. TD pencils in a rate cut for May.”
Key Quotes
“The RBA quarterly Statement on Monetary Policy revealed underlying assumptions for GDP and CPI that were barely tweaked. A closer read of the report detailed why this was the case.”
“The better than anticipated forecasts were based off market pricing, that implies a cash rate closer to 2%.”
“The Bank expects “a bit below trend” GDP growth of 2¾%/yr through to end-2015 (was 3%/yr) then climb to 3¼%/yr by mid-2016, unchanged. The new forecast is a further rise towards 3¾%/yr by mid-2017 via consumption and LNG exports, well over the accepted trend pace of 3-3¼%.”
“The Bank’s underlying inflation profile was revised down by -¼% across the board. However, we thought there might be a dip to 2%/yr near-term to justify the “haste” of Tuesday’s cut.”
“Instead, the Bank expects 2¼%/yr for mid-year (was 2½%/yr) before drifting towards mid-target 2½%/yr by year end, and remaining there through to mid-2017.”
“All up, we see little in the report to support consecutive rate cuts. TD pencils in a rate cut for May.”