4 Feb 2014
Flash: Choice of words in the RBA statement key - Westpac
FXStreet (Barcelona) - According to Sean Callow, FX Strategist at Westpac, there is no market debate over whether the RBA will keep the cash rate steady at 2.5% today but considerable discussion over the choice of words in the statement.
Key Quotes
"Most forecasters expect that with signs of response to low interest rates in housing construction, retail sales and business confidence and of course the sharp upside surprise in Q4 CPI, the RBA will drop its lingering easing bias this month. But in late 2013, this bias was only evident in the monthly minutes and quarterly statements. Hence if the RBA persists with this pattern then we will have to wait for Friday to see if the reference to another rate cut is retained."
"Still, today’s statement will have to include some new language on inflation and presumably AUD. At the Dec meeting, with AUD/USD around 0.91, the RBA deemed the currency to be “still uncomfortably high”, a verdict that seems hard to justify now (AUD TWI has fallen -3.7% since the last meeting). We suspect this phrase will be dropped or at least watered down but we may still hear that a weaker AUD is “likely to be needed to achieve balanced growth”, more of a long term comment. AUD/USD seems likely to emerge somewhat higher after the statement, but Friday’s SoMP seems the bigger RBA event for the week."
Key Quotes
"Most forecasters expect that with signs of response to low interest rates in housing construction, retail sales and business confidence and of course the sharp upside surprise in Q4 CPI, the RBA will drop its lingering easing bias this month. But in late 2013, this bias was only evident in the monthly minutes and quarterly statements. Hence if the RBA persists with this pattern then we will have to wait for Friday to see if the reference to another rate cut is retained."
"Still, today’s statement will have to include some new language on inflation and presumably AUD. At the Dec meeting, with AUD/USD around 0.91, the RBA deemed the currency to be “still uncomfortably high”, a verdict that seems hard to justify now (AUD TWI has fallen -3.7% since the last meeting). We suspect this phrase will be dropped or at least watered down but we may still hear that a weaker AUD is “likely to be needed to achieve balanced growth”, more of a long term comment. AUD/USD seems likely to emerge somewhat higher after the statement, but Friday’s SoMP seems the bigger RBA event for the week."