The RBA's economic outlook is a little less confident as rates kept on hold for another month

07 March 2018

The Reserve Bank has left interest rates on hold again for the 19th consecutive month.

In its policy statement for March released yesterday, the RBA look set to stick with the current rate of 1.5 per cent for some time yet as it feels a little less confident about the economic outlook for the rest of the year.

While wage growth may be slowly starting to turn the corner it is being held back by the unemployment rate, which sits at around 5.5 per cent.

The RBA appears to be less confident about economic growth while it is still uncertain about when wages will start to rise.

The Reserve Bank did say it expects the Australian economy to grow faster this year than it did in 2017.

Bill Evans from Westpac Bank said he expects rates to start rising towards the end of the year.

“The Reserve Bank appears to be less confident about the growth outlook,” he told Business Insider.

“Nevertheless, we still believe that it expects to be raising interest rates beginning sometime in late 2018 and into 2019.”

“That would be in line with current market pricing.”

In terms of the RBA’s more downbeat outlook for the economy, JP Morgan’s Ben Jarman said the central bank was taking a more vague stance in its statement.

“Of the few tweaks, the most significant is that the commentary on growth is now more vague, not surprisingly on the basis of recent activity data and a soft tracking estimate for tomorrow’s GDP result,” he told Business Insider yesterday.

“In February, the commentary stated the central forecast was for GDP growth to pick up, to average a bit over 3 per cent over the next couple of years.”

“Now the Governor states that the economy will grow faster in 2018 than it did in 2017.”

The ANZ’s Felicity Emmett told Business Insider that the RBA’s statement indicated the central bank was more comfortable with the risks around the property market.

“The RBA seems to be more comfortable with the risks around housing, but still alert to them,” she said.

“The language around housing dynamics was changed slightly, suggesting that the Bank perceives macroprudential measures as having run their course.”

“The statement notes that APRA’s supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high.”

“We imagine that the RBA will be watching house price and housing debt data quite closely over coming months, given the apparent stabilisation in the data after a period of regulation driven weakness,” Ms Emmett said.


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