31 Jan 2014
Flash: RBA to stay on the sidelines - BAML
FXstreet.com (Barcelona) - The research team at BAML believes a rate cut by the RBA would be most like in the second half of the year.
Key Quotes
"The RBA will be on hold at its February meeting and likely throughout 1H14. However, we still believe there is a solid case for the RBA to ease rates in 2H as uncertainty as to the prospects for economic growth remains high."
"The RBA is faced with a modest recovery in non-mining components of demand while it is expecting the resources investment cycle to detract from economic growth in the back half of the year. This will keep domestic demand growth weak and the unemployment rate will continue to rise."
"For the February meeting we believe economic activity still warrants a slight easing bias to be held. Yet recent inflation figures could see a more neutral stance flirted with."
"We expect the RBA will need to be careful here as it will not want to give the A$ any upward momentum by altering its tone significantly. This is especially true as it looks to talk the exchange rate down further."
"The RBA's view on the recent spike in inflation will be important. If it is content to look through recent data as a temporary spike then it should be free to ease rates in 2H. Yet if it is viewed as more permanent it may give it much less room to move. With our forecast for the A$ at US$0.88 we currently take the former view."
Key Quotes
"The RBA will be on hold at its February meeting and likely throughout 1H14. However, we still believe there is a solid case for the RBA to ease rates in 2H as uncertainty as to the prospects for economic growth remains high."
"The RBA is faced with a modest recovery in non-mining components of demand while it is expecting the resources investment cycle to detract from economic growth in the back half of the year. This will keep domestic demand growth weak and the unemployment rate will continue to rise."
"For the February meeting we believe economic activity still warrants a slight easing bias to be held. Yet recent inflation figures could see a more neutral stance flirted with."
"We expect the RBA will need to be careful here as it will not want to give the A$ any upward momentum by altering its tone significantly. This is especially true as it looks to talk the exchange rate down further."
"The RBA's view on the recent spike in inflation will be important. If it is content to look through recent data as a temporary spike then it should be free to ease rates in 2H. Yet if it is viewed as more permanent it may give it much less room to move. With our forecast for the A$ at US$0.88 we currently take the former view."