The Reserve Bank of Australia may be widely expected to keep interest rates on hold at its policy-setting meeting on Tuesday, but analysts will be closely watching its statement to see which way the wind is blowing.
“The risk is the RBA adopts more upbeat views on Australian economic activity considering the solid growth in employment,” Commonwealth Bank of Australia said in a note on Monday.
The RBA has kept its benchmark rates at a record low of 1.5 percent since August last year.
Economic growth has appeared slightly anemic. Last month, Australia reported gross domestic product for the first quarter rose 1.7 percent on-year, which did beat a Reuters poll forecast for 1.5 percent growth.
But economists have said growth would likely improve in the second quarter, as economic activity was hindered by Cyclone Debbie earlier in the year.
That doesn’t mean they’re expecting much, with some saying the RBA’s projection for growth to climb to “a little above 3 percent” in the next few years may be too optimistic.
At its last meeting, the central bank said the global environment has continued to pick up and improvements had been made in the domestic economy. In particular, on the housing market, RBA said recent supervisory measures “should help address the risks associated with high and rising levels of indebtedness.”
The housing market has been the challenge: If the RBA were to cut rates further, then the easier liquidity would drive property prices even higher.
The CoreLogic Hedonic Home Value Index, released on Monday, showed that in the April-to-June quarter, capital city dwelling values rose 0.8 percent on-quarter and 9.6 percent on-year.
Still, some were expecting little from the RBA meeting.
“Nothing appears to have changed, since the last meeting. The global outlook including China remains broadly positive, labor markets in Australia continue to tighten, core inflation remains low, as do long term bond yields, and there is no significant easing expected in other major economies,” Rob Carnell, head of research for Asia at ING, said in a note on Monday.
“If they want to save time, the RBA can take the June rate meeting statement, change the date, and send it out unchanged,” he said.
—CNBC’s Yen Nee Lee contributed to this article.
Source: cnbc china
Devil is in the details for Australia's central bank meeting