RBA Interest Rate Decision (June 2019)


Posted on: 2019-06-04 (Day) By BCR Market Event


 

The Reserve Bank of Australia kept the interest rate at a record low of 1.5% as expected in May’s meeting.  It is the longest policy pause in the reserve bank’s history. According to the economists’ forecast, RBA is likely to have a 25bps rate cut in June’s meeting to achieve the inflation target over time. The reverse bank also noted that the low level of interest rates is continuing to support the Australian economy.

RBA Interest Rate (%)

 

 

RBA Interest Rate Announcement History

 

Date                                      Previous              Consensus          Actual

04 June 2019                      1.5%                      1.25%                   

07 May 2019                       1.5%                     1.5%                    1.5%

02 Apr 2019                         1.5%                     1.5%                    1.5%

05 Mar 2019                        1.5%                     1.5%                    1.5%

05 Feb 2019                        1.5%                     1.5%                    1.5%

04 Dec 2018                        1.5%                     1.5%                    1.5%

06 Nov 2018                        1.5%                     1.5%                    1.5%     

02 Oct 2018                         1.5%                     1.5%                    1.5%

04 Sep 2018                        1.5%                     1.5%                    1.5%

07 Aug 2018                        1.5%                     1.5%                    1.5%

 

 

 

Opportunities can be found in the statement

 

Inflation Rate

“The inflation data for the March quarter were noticeably lower than expected and suggest subdued inflationary pressures across much of the economy. Over the year, inflation was 1.3 per cent and, in underlying terms, was 1.6 per cent. Lower housing-related costs and a range of policy decisions affecting administered prices both contributed to this outcome. Looking forward, inflation is expected to pick up, but to do so only gradually. The central scenario is for underlying inflation to be 1¾ per cent this year, 2 per cent in 2020 and a little higher after that. In headline terms, inflation is expected to be around 2 per cent this year, boosted by the recent increase in petrol prices.” Referring to RBA’s Statement on Monetary Policy – May 2019.

A worse-than-expected annual inflation rate is showing a reading of 1.3% (YoY) in the first quarter of 2019. Sharply declined from last reading of 1.8%. It was the lowest inflation rate since Q3 in 2016, mainly due to a slowdown in petrol and housing prices. However, further progress in having inflation return to target is expected, although this progress is likely to be gradual.

Australian Inflation Rate (%)

 

 

GDP

 “The central scenario is for the Australian economy to grow by around 2¾ per cent in 2019 and 2020. This outlook is supported by increased investment in infrastructure and a pick-up in activity in the resources sector, partly in response to an increase in the prices of Australia's exports. The main domestic uncertainty continues to be the outlook for household consumption, which is being affected by a protracted period of low income growth and declining housing prices. Some pick-up in growth in household disposable income is expected and this should support consumption.” Referring to RBA’s Statement on Monetary Policy – May 2019.

The GDP (YoY) in Australia expanded 2.3% in the Q4 of 2018, this is the weakest annual pace of expansion within 2018. Uncertainties remaining from external global economies. In response to the international trade policy of the US, the economic outlook of households, businesses and financial markets will be influenced significantly. Especially in China, the authorities have taken steps to ease financing conditions, partly in response to slower growth in the economy.

Australian GDP Annual Growth Rate (%)

 

 

Unemployment Rate

The Australian labour market remains strong. There has been a significant increase in employment, the vacancy rate remains high and there are reports of skills shortages in some areas. Despite these positive developments, there has been little further progress in reducing unemployment over the past six months. The unemployment rate has been broadly steady at around 5 per cent over this time and is expected to remain around this level over the next year or so, before declining a little to 4¾ per cent in 2021. The strong employment growth over the past year or so has led to some pick-up in wages growth, which is a welcome development. Some further lift in wages growth is expected, although this is likely to be a gradual process.” Referring to RBA’s Statement on Monetary Policy – May 2019.

The Unemployment rate rose to 5.2% in April 2019, slightly higher than the prior month and market expectations. A further gradual decline of the unemployment rate is expected over the next couple of years. Wages growth increased and likely to drift upwards. Also, it is expected to grow gradually in the foreseen future.

Australian Unemployment Rate (%)

 

 

 

Technical View

 

The Aussie dollar rallied against the greenback on the 23rd of May. The price finally found its support level at 0.6864. The price reflected in FOMC’s dovish stance. In the daily timeframe, MACD is losing its bearish momentum. RSI has climbed above the neutral axis. However, the price is still moving beneath the MA system. Focus on 0.70 major barrier for further movement, also keep eyes on RBA’s statement tomorrow.

AUDUSD D1 Chart​​​​​​​