RBA Interest Rate Decision (May 2019)


Posted on: 2019-05-06 (Day) By BCR Market Event


 

The Reserve Bank of Australia kept the interest rate at a record low of 1.5% as expected in April’s meeting.  It is the longest policy pause in the reserve bank’s history. According to the economists’ forecast, the stance of monetary policy likely to be held in May’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

07 May 2019                       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%

03 Jul 2018                           1.5%                     1.5%                    1.5%

 

 

Opportunities can be found in the statement

 

Inflation Rate

“Inflation remains low and stable. Underlying inflation is expected to pick up gradually over the next couple of years, although this has been taking a little longer than earlier expected. The central scenario is for underlying inflation to be 2 per cent this year and 2¼ per cent in 2020. In the near term, headline inflation is expected to decline because of lower petrol prices earlier in the year, while underlying inflation is expected to remain broadly stable.” Referring to RBA’s Statement on Monetary Policy – April 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 GDP data paint a softer picture of the economy than do the labour market data. GDP rose by just 0.2 per cent in the December quarter to be 2.3 per cent higher over 2018. Growth in household consumption is being affected by the protracted period of weakness in real household disposable income and the adjustment in housing markets. The drought in parts of the country has also affected farm output. Offsetting these factors, higher levels of spending on public infrastructure and an upswing in private investment are supporting the growth outlook, as is the steady growth in employment.” Referring to RBA’s Statement on Monetary Policy – April 2019.

The GDP (YoY) in Australia expanded 2.3% in the Q4 of 2018, this is the weakest annual pace of expansion within the year. 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 and the unemployment rate is at 4.9 per cent. The vacancy rate remains high and there are reports of skills shortages in some areas. The stronger labour market has led to some pick-up in wages growth, which is a welcome development. Continued improvement in the labour market is expected to see some further lift in wages growth over time, although this is still expected to be a gradual process.” Referring to RBA’s Statement on Monetary Policy – March 2019.

The Unemployment rate rose to 5% in March 2019, slightly higher than the prior month and matching 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 is remaining in the downward trend against the greenback. The pair slipped beneath 0.6962 fresh low since January 2019. The price reflected to the weekend news concerning the US-China trade war on Trump’s tweets. In the daily timeframe, MACD is continually gaining bearish momentum and RSI is remaining very close to the oversold territory. The price is moving well below the MA system as showing its short order. In overall, the AUDUSD pair is still heading South in the long-term. Focus on the RBA’s rate decision tomorrow, also keep eyes on the progress of US-China trade war.

AUDUSD D1 Chart​​​​​​​