RBA: rising inflation potentially challenged by soft wage growth? - ANZ

Analysts at ANZ explained that there were only a few changes of note in yesterday’s RBA’s statement, mostly with regard to housing.

Key Quotes:

"This is of little surprise just one month after the February forecast update. Having said this we do think there have been some substantive developments over the past month, most notably: continued improvement in the global economy; a decent rebound in the Australian economy in Q4; further weakness in wages despite this recovery; and an acceleration in house price inflation in Sydney and Melbourne."

"How these developments impact the RBA’s policy outlook will depend significantly on the Q1 CPI outcome due in late April, in our view. It is not inconceivable that the Bank is faced with a softer inflation environment even as it maintains its bullish view on activity. Given the strength in house prices this will present a major policy challenge.

We continue to see rates on hold at 1.5% for an extended period, with the RBA’s outlook for gradually rising inflation potentially challenged by soft wage growth."