RBA: No material shift in thinking - Nomura

The Reserve Bank of Australia (RBA) left its cash rate at 1.50% at today’s meeting, as was uniformly expected and the press release repeated key messages and did not indicate any material shift in thinking, points out Andrew Ticehurst, Research Analyst at Nomura.

Key Quotes

“Rates bears could point to the addition of a new phrase, that “the rate of wage growth appears to have troughed”, although bulls could note a more emphatic comment that “the housing markets in Sydney and Melbourne have slowed”. Overall, the press release suggests that, with the passage of time, the RBA still believes it is on track towards meeting its inflation and employment objectives. We remain on the lookout for any shift in tone over coming months, which we believe will most likely be in a hawkish direction. Our base case remains for a first rate hike in Q1 2019, although we still see risks tilted towards an earlier move.”

“We continue to think that the very front of the OIS strip has rallied too far and remain happy holding a paid May OIS and a July-August OIS steepening position, seeing these as relatively low-risk, option-like strategies. We also remain a little cautious on AUD, noting that the shorter-term speculative community is positioned long, and expect lower bulk commodity prices to see AUD ease to around AUD/USD 73-75 cents over Q2/Q3.”