As expected, no changes from the RBA – UOB

Lee Sue Ann, Economist at UOB Group, assesses the latest RBA event (May 4).

Key Quotes

“The Reserve Bank of Australia (RBA), as expected, decided to maintain the current policy settings at its May meeting, including the targets of 10 basis points for both the cash rate and the yield on the 3-year Australian Government bond, as well as the parameters of the Term Funding Facility and the government bond purchase program.”

“Although the overall tone of today’s accompanying statement remains dovish, the RBA upgraded its economic view. The central bank now expects GDP growth of 4¾ per cent over 2021 and 3½ per cent over 2022. The unemployment rate is expected to continue to decline, to be around 5 per cent at the end of this year and around 4½ per cent at the end of 2022. Meanwhile, inflation in underlying terms is expected to be 1½ per cent in 2021 and 2 per cent in mid-2023.”

“Also, the RBA specified for the first time, that it will consider at the July meeting, whether to retain the April 2024 bond as the target bond for the 3-year yield target or to shift to the next maturity, the November 2024 bond.”

“We continue to expect the cash rate to remain unchanged until 2024 and look for a full AUD100bn extension of QE beyond the second round. All eyes will now turn to the RBA’s quarterly update of economic forecasts this Friday (7 May), and RBA Deputy Governor Guy Debelle is due to speak in the mining-centred state capital Perth the day before that.”