No signs of an imminent move from the RBA
As expected the RBA kept the cash rate at 1.5%, with the Board signalling the accommodative monetary policy is still necessary to support the economy. They continue to flag that it will be some time before we see an acceleration in wage growth, with real wages rising just 0.2% y/y in the December quarter, with household spending posing the biggest threat to the outlook.
The RBA’s central forecast is for headline inflation to be slightly above 2% in 2018, however this will partially be driven by a number of one-off factors including an excise tax hike on tobacco, and higher food prices. With growth in GDP still tracking below potential and slack still to be absorbed in the labour market, underlying inflation is likely to stay the bottom (or even below) the RBA’s 2-3% target band. We expect the RBA to stay on the side lines until H2 2019.