RBA to remain on hold for a considerable period – NAB

By FXStreet FXStreet (Bali) – James Glenn, Senior Economist at National Australia Bank, continues to expect the RBA to remain on hold for a considerable period.

Key Quotes

In Australia, we remain of the view that the gradual recovery in the non-mining sector is gaining traction. Recent outcomes from the business survey support this contention, while the unemployment rate is holding steady.

In addition, partial indicators for Q3 GDP suggest a high outcome, which would retrace the temporary weakness in Q2. The RBA appears to concur with this assessment, and chose to hold off further monetary policy easing in the month despite some tightening of financial conditions.

Low inflation however does provide room for the RBA to ease, although this would require evidence that local demand conditions are deteriorating again (not our or the RBA’s central case scenario), and more concrete evidence that housing demand is easing. As such the RBA is expected to remain on hold for an extended period, although we have pushed out the timing of the first hike until mid-17.

Real GDP is forecast to expand by 2.6% in 2015/16 and 3.0% in 2016/17, with El Niño only subtracting marginally. The unemployment rate eases gradually but remains elevated for …read more

Source:: FX Street