RBA’s Looking To Raise Rates In 2019 -

RBA’s Looking To Raise Rates In 2019

Aug 07, 2018Jeremy ParkinsonFinance0

RBA is positive on Australia’s economy and plans to raise rates in 2019, long AUD/NZD?

RBA delivered an upbeat assessment of both the domestic and global economies and plans to raise rates in 2019 after keeping interest rate at record low for 2 years.

RBA kept interest rate unchanged at the record low of 1.5% as widely expected.

RBA downgraded forecasts for inflation later this year citing “once off” factors but believe that wage pressures will be building in some parts of the economy. This is important as RBA’s reasons for holding interest low for the past 2 years was due to below-target inflation as well as high household debt.

Governor Lowe was amended his language and said that growth “has slowed a little” amidst risk in the financial sector and risk from US-China trade war escalations. He further mentioned “GDP growth is expected to average a bit above 3% in 2018 and 2019”.

Unemployment rate is expected to fall to 5% from 5.4% currently “over the couple of years”. Wage growth, on the other hand, is expected to remain low as Governor Lowe acknowledged.

Although RBA leaned towards hawkishness this time round, Australian dollar still lacks the catalyst to have any sustained gains. This is due to a disappointing Q2 CPI and Australia’s data so far has not been as strong as what RBA mentioned.

AUDNZD has broken out of the descending triangle formation which is deemed as bullish. We expect prices to continue to move higher with the expectation of a dovish New Zealand rate statement. We could see price move towards 1.1300 price region.