RBA probability in outcomes: Probability Neutral (80%) - TDS

Analysts at TD Securities, (TDS), offer scenarios for this week's RBA.

Key Quotes:

• "Probability Dovish (<15%):

The hurdle for the RBA to turn outright dovish is very high - it would require 2 successive soft CPI prints, the tightening in credit to morph into a crunch AND a trade war. Outside of trade war risks, the RBA has time on its hands to assess the data outcomes. To sound dovish now before the data has turned would run counter to the Bank's 'gradual' policy stance.

• Probability Neutral (80%):

The market is placing a lot of focus on the Bank removing it is “more likely that the next move in the cash rate would be up, rather than down” from the June Minutes. We think too much emphasis is being placed on this omission for tomorrow's statement given this phrase has not featured in prior statements (only the Minutes). That said, the RBA commentary in the past month does suggest the Bank is likely to keep the cash rate on hold for longer than anticipated given muted wage pressures.

• Probability Hawkish (<5%)

Recent commentary from the RBA suggests they would be more comfortable with wages growing closer to 3% than the current 2% before hiking. Also Gov Lowe indicated wages growth of 2% and reasonable productivity growth would not see inflation above 2.5% on a sustained basis. So the RBA would be hard pressed to relay a hawkish stance. The Bank has gone to some length to relay its 'gradual' and steady approach to monetary policy. Why change?"