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The Reserve Bank of Australia (RBA) has maintained its benchmark interest rate at the current record-low level of 1.50 percent at its first monetary policy meeting of 2017, held earlier today, as was widely anticipated by market participants.
There were a number of changes to the statement, although the tone of the statement was broadly unchanged, except for the comments on the global economy which were more upbeat. A key change to today’s statement was the tone of comments around the global economy. The central bank noted that conditions had improved over recent months, with a pick-up in both business and consumer confidence.
On the domestic front, the outlook was largely unchanged. The bank still expects GDP growth to return to 'around 3 percent over the next couple of years', with the weakness in Q3 GDP 'largely reflecting temporary factors'.
In terms of inflation, the new forecasts (which will be published in Friday’s Statement on Monetary Policy) are 'little changed', with headline line inflation expected to pick up above 2 percent in 2017, but the improvement in underlying inflation likely to be more gradual.
The RBA still seems somewhat concerned about the labour market, noting that the recent data continue to be mixed. The CB sounds encouraged by the pick-up in full-time workers, but disappointed by the tick higher in the unemployment rate. Overall though, it continues to expect employment to expand over the period ahead.
"We continue to think that persistently low inflation will keep the RBA on hold for some time. This, combined with ongoing strong retail competition and slowing rental growth, suggests that any upswing in inflation over the next couple of years is likely to be very modest leaving the cash rate on hold over the next year or so," ANZ Research commented in its latest research publication.
Meawhile, the ASX 200 index traded 0.13 percent higher at 5,566.50 at 05:10GMT, while at 05:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 48.76 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex
