RBA left empty handed – TDS

TD Securities analysis team explains that as per expected lines, the RBA left the cash rate at 1.5%, extending the record run of sitting on the sidelines.

Key Quotes

“The policy statement was surprisingly similar to last month, despite the Governor shifting from "next move is up" to "neutral" in a speech the next day. With the RBA Governor scheduled to speak early tomorrow on "Housing and the Economy", it will be mandatory reading.”

“The Bank also repeated the February assessment of housing (to be discussed further in tomorrow's speech): (1) Sydney and Melbourne are adjusting after an earlier "large run-up in prices" (2) "the demand for credit by investors ... has slowed noticeably; and (3) credit for owner-occupiers "has eased further" (last month "eased to 5½%").”

“Earlier, the Dec qtr data reports were a mixed bag: strong public spending (+1.5%/q or +0.4%pts to GDP) outpacing a larger detraction from net exports (-0.2%pts, TD and mkt -0.1%pt). Our forecast for tomorrow's GDP report is +0.2%/q and +2.4%/y (mkt +0.4%/q, 2.6%/y). Don't forget 25% of GDP remains unknown, i.e. consumption that isn't covered by the retail sales report (health, education, rent, utilities, communication, transport, all essential services).”

“We remain of the view that a low and stable exchange rate is more beneficial for the economy than another rate cut. TD and consensus expects the 1.5% cash rate to prevail through to mid-2020.”