RBA: Still on the side-lines but watching closely – TDS

Analysts at TDS explain that the RBA left the cash rate at 1.5% as expected by TD and unanimous consensus and the Bank last cut in August 2016.

Key Quotes

“The Bank noted the recent tightening in lending standards and higher mortgage rates. We expected this given that its fellow Council of Financial Regulators members APRA and ASIC just stepped up their measures/supervision in the face of “heightened risks” from housing.”

“The RBA appears confident about the global backdrop, but provided an offset via reiterating its concerns about the soft underbelly of the labour market. Otherwise, the statement was a near-repeat of March, without a hawkish tilt.”

“To shift the RBA into a more hawkish stance we need to see (1) no slowdown in riskier lending in the coming months and (2) further improvement in full-time hours worked. The March employment report is released on April 13.”

“The APRA/ASIC announcements are likely to be too little, too late and poorly targeted. The acceleration in house price inflation and record household debt were well entrenched before the recent pickup in interest-only lending. As we doubt these jawbone policies will curb banking practices we still look for a higher cash rate by year end.”