RBA to remain on hold as downside risks ease - ANZ

Research Team at ANZ, had revised their rate profile and now expect the RBA to remain on hold at 2% this year and next.

Key Quotes

“We removed our call for two cuts of 25bps each this year given the firmer footing for the domestic economy and the lower unemployment rate.

In September last year when we called for rate cuts, we, like many others, were revising down our Asian economy forecasts and the risks there seemed tilted to further weakness. However, now some of the data look to have stabilised and in particular the China economic outlook is better. The latest Chinese PMI data, released on Friday, is further evidence that recent activity indicators are not validating an excessively bearish view on China.

The signal from commodity prices also suggests that markets believe the outlook for global growth is less gloomy. The stabilisation in commodity prices suggests that markets are thinking that global demand is not deteriorating further and is a positive for the Australia economy, given it is a commodity exporter.

Moreover, financial markets have settled down after the volatility in January and February.
On the domestic front, key factors for revising our call were the surprising strength in labour market data at the end of last year as well as the strength in business conditions.”