RBA, RBNZ and Fed focus - ANZ

Analysts at ANZ explained that as expected, the RBA yesterday left rates unchanged at 1.5%.

Key Quotes:

"Global economic conditions were noted to have improved recently, but the domestic economy is more mixed, with the tick higher in the unemployment rate somewhat disappointing, while the stronger demand from housing investors and rising leverage are likely to count against further cuts. On balance, we think the persistently soft inflation environment is likely to keep the RBA on hold for some time.

Across the ditch, yesterday saw a pickup in the RBNZ’s 2-year ahead inflation expectations, from 1.68% to 1.92%. This will be welcomed given the RBNZ has been dealing with uncomfortably low expectations for a while now, and it joins other measures that have risen off lows. It is one of a number of developments that make the RBNZ’s soft easing bias from November increasingly hard to justify. Nonetheless, it appears too early for the RBNZ to resurrect a tightening bias at this stage, and we expect the RBNZ to keep the OCR at 1.75% tomorrow.

Meanwhile in the US, the Fed’s Kashkari released an essay on ‘Why I voted to keep rates steady’. He struck a dovish tone, noting that “it is better to err on the side of being more accommodative than being more restrictive”. Inflation sitting below target, and spare capacity still remaining in the labour market led him to vote to keep rates unchanged at the Fed’s last meeting."