4 Dec 2014
RBA unlikely to change policy stance before 2016 – Nomura
FXStreet (Barcelona) - The Research Team at Nomura, note that Australian GDP grew by 0.3% q-o-q in Q3 2014 (2.7% y-o-y), much weaker than market expectations, and believe that the RBA is unlikely to change its policy stance before 2016.
Key Quotes
“With growth weaker than the RBA's expectations (in the latest policy statement on 2 December, the RBA characterised growth as "moderate"), growth is likely to come in short of the 2.5% y-o-y in Q4 expected by the RBA in the November Statement on Monetary policy, unless there is a rebound in growth in Q4. As a result, we now believe the RBA is unlikely change its policy stance before 2016.”
“While we recognise that risks on the policy rate are on the downside, we continue to believe that the hurdle for the RBA to cut its policy rate remains high, because of the financial stability concerns linked to the housing market.”
“As we have shown previously, we believe the introduction of macroprudential measures alone are unlikely to be enough to push the RBA into action and that it requires further signs that growth is moderating and inflationary pressures are moderating. Nevertheless, the tone of the statement following the February meeting will likely be slightly more dovish.”
“We have a bearish view on AUD, as more depreciation is needed for the currency to converge to fundamentals and because of further USD strength. However, with growth showing signs of weakness, risks are on the downside. Moreover, any rate cut by the RBA will likely moderate inflows from Japanese investors and as the financial market is pricing in about a 20bp cut, this could already be affecting those flows”
Key Quotes
“With growth weaker than the RBA's expectations (in the latest policy statement on 2 December, the RBA characterised growth as "moderate"), growth is likely to come in short of the 2.5% y-o-y in Q4 expected by the RBA in the November Statement on Monetary policy, unless there is a rebound in growth in Q4. As a result, we now believe the RBA is unlikely change its policy stance before 2016.”
“While we recognise that risks on the policy rate are on the downside, we continue to believe that the hurdle for the RBA to cut its policy rate remains high, because of the financial stability concerns linked to the housing market.”
“As we have shown previously, we believe the introduction of macroprudential measures alone are unlikely to be enough to push the RBA into action and that it requires further signs that growth is moderating and inflationary pressures are moderating. Nevertheless, the tone of the statement following the February meeting will likely be slightly more dovish.”
“We have a bearish view on AUD, as more depreciation is needed for the currency to converge to fundamentals and because of further USD strength. However, with growth showing signs of weakness, risks are on the downside. Moreover, any rate cut by the RBA will likely moderate inflows from Japanese investors and as the financial market is pricing in about a 20bp cut, this could already be affecting those flows”