Reserve Bank of Australia likely to keep key rate on hold in 2018 as well – NORDLB Research

The Reserve Bank of Australia’s November meeting minutes show that the central bank seems increasingly worried about the merely moderate growth in wages. In spite of the ongoing buoyant employment situation, the inflation trend continues to below expectations and is raising questions among the central bankers, noted NORDLB Research in a report.

Nevertheless, the RBA is not alone with this enigma. Meanwhile, the positive and negative economic signals appear to be in balance at the moment. Also, global recovery in demand is boosting exports. Meanwhile, given the low wage dynamics and high levels of private debt, there are in particular risks for the private households and therefore for consumption.

Against this backdrop the RBA would possibly keep the key rate on hold a 1.50 percent next year as well. Accordingly, the yield on ten-year Australia government bonds would remain below the 3 percent mark in 2018 too, stated NORDLB Research. The expectations of a U.S. Fed rate hike made for pressure on the Australian dollar, though some extend of fantasy is probably priced into the calculation in the meantime, added NORDLB Research.

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