RBA: Upswing is forecasted to continue – HSBC

Analysts at HSBC points out that the RBA left its cash rate unchanged at 1.50%, as expected and the post-meeting statement acknowledged that the recent pick-up in CPI inflation to above 2% was in line with the central bank’s expectation.

Key Quotes

“The statement also noted that the RBA’s own forecasts are little changed, with growth forecast to be ‘a little above 3%’ over the next couple of years and a ‘gradual further increase in underlying inflation’ expected. Despite the ‘mixed’ labour market indicators, the RBA noted that they expect the unemployment rate to ‘decline gradually over time’. It seems that, although the Sydney and Melbourne housing booms are the key reason the RBA has no appetite for cutting further, the central bank is also convinced that the economy does not need further stimulus to get underlying inflation back to target. We agree and see the RBA firmly on hold in 2017 and lifting its cash rate in Q1 2018.”