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22 Apr 2015
Drop in Australian inflation to force RBA off the sidelines - RBS
FXStreet (Bali) - According to the RBS FX Strategy Team, a drop in Australian inflation today, particularly core inflation, would likely force the RBA off the sidelines.
Key Quotes
"Both the RBA April minutes last night and comments by Governor Stevens yesterday suggested that the RBA may see a lessened impact on the real economy of rate cuts given the high level of leverage. Even so, the RBA maintained its stance that “further easing of policy may be appropriate in the period ahead.” The minutes also added that, in April, “members also saw advantages in receiving more data, including on inflation, to assess whether or not the economy was on the previously forecast path and allowing more time for the economy to respond to the reduction in the cash rate earlier in the year.”
"The specific mention of inflation when discussing the merits of receiving more data may signal that a drop in inflation, particularly core inflation, would push the RBA off the sidelines. The RBA anticipates that headline inflation is likely to fall further this year due in part to lower oil prices but underlying inflation is seen as holding fairly steady at around 2.25% in the first half of this year and “is expected to remain well contained and consistent with the inflation target throughout the forecast period.”
Key Quotes
"Both the RBA April minutes last night and comments by Governor Stevens yesterday suggested that the RBA may see a lessened impact on the real economy of rate cuts given the high level of leverage. Even so, the RBA maintained its stance that “further easing of policy may be appropriate in the period ahead.” The minutes also added that, in April, “members also saw advantages in receiving more data, including on inflation, to assess whether or not the economy was on the previously forecast path and allowing more time for the economy to respond to the reduction in the cash rate earlier in the year.”
"The specific mention of inflation when discussing the merits of receiving more data may signal that a drop in inflation, particularly core inflation, would push the RBA off the sidelines. The RBA anticipates that headline inflation is likely to fall further this year due in part to lower oil prices but underlying inflation is seen as holding fairly steady at around 2.25% in the first half of this year and “is expected to remain well contained and consistent with the inflation target throughout the forecast period.”