RBA to stay on hold in 2017 and 2018 - Westpac

Bill Evans, Chief Economist at Westpac, suggests that they continue to expect RBA rates to remain on hold for the remainder of 2017 and throughout 2018.

Key Quotes

“As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5% in May. The statement accompanying the decision finished in the usual way “the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”. We continue to expect rates to remain on hold for the remainder of 2017 and throughout 2018.”

“The Bank is still cautious around wages growth, pointing out that wages growth is expected to pick up only gradually at a slightly slower pace than had been forecast in February. We agree with their view that spare capacity in the labour market is likely to weigh on wages growth over the next few years and note their observation that information from the Bank’s liaison program also supports a continuation of the current weak wage environment. This outlook for wages and inflation, as well as our view on sub–trend output growth in 2018, points to the RBA leaving rates unchanged throughout 2017 and 2018.”