After last week’s big change of heart by the US Federal Reserve will we something similar tomorrow from the Reserve Bank at its first meeting for 2019?
The odds are very unlikely but we may see some changes of emphasis and forecasts in the post-meeting statement from RBA Governor Phil Lowe on Tuesday, a speech from him on Wednesday in Sydney and the first of the four Statements On Monetary Policy for the year on Friday.
Economists now think the RBA will either keep rates on hold for much of this year or cut them in the second half if housing prices and household consumption remain weak to trending lower.
Very few economists are calling for a rate rise and those that are doing so are completely out of touch. Inflation is not a problem and the fear is that after rising to 2.1% (annual) midway through 2018, it is now easing.
Overall economists expect the RBA to leave rates on hold for the 27th meeting in a row tomorrow.
The AMP’s chief economist Shane Oliver says the RBA’s “post-meeting commentary, a speech by Governor Lowe (Wednesday) and in its quarterly Statement on Monetary Policy (Friday) is likely to strike a more balanced less upbeat tone reflecting a softer outlook domestically and various threats to growth globally as highlighted by recent share market volatility and falling bond yields.”
“In particular, after a run of soft data including weaker than expected September quarter GDP growth its likely to downgrade its growth forecasts from “around 3.5%” to around 3% and it may further lower its inflation forecasts.
“Our view remains that the RBA will cut the cash rate twice this year taking it down to 1% as the housing slowdown cuts into growth and threatens the inflation outlook, but the RBA is not quite there yet,” Dr Oliver wrote at the weekend.
Elsewhere in Australia, there’s December’s building approvals (today) and retail sales and the December trade account (all out tomorrow).
The long-awaited final report from the finance and banking Royal Commission will be released this afternoon and will be watched closely for its implications for bank shares.
The Australian December 31 earnings reporting season steps up this week (See separate earnings story).
Offshore and it’s the Lunar New Year holidays this week across Asia, especially China which will be closed all week – Singapore, Malaysia, Indonesia, Taiwan, and South Korea will also enjoy several days off this week. The Year of the Pig Starts tomorrow, so tonight is New Year’s Eve.
In the US the December quarter earnings season continues with nearly 100 companies down to report (See separate earnings story).
As well we will get data releases delayed by the Trump shutdown – durable goods orders, December core consumption deflator inflation remaining, the first estimate of December quarter GDP growth (around 2.6% is the best guess, down from just over 3% in the previous quarter), retail sales and housing starts.
After the blockbuster January jobs report – 304,000 new gigs created (and an average of 241,000 in the past three months) and wages rising at 3.2% a year, strong retail sales, durable goods, and building figures will see more questioning of the Fed’s decision to go all dovish and sit on interest rates.
Donald Trump delivers his State of The Union Speech Wednesday our time – two days after the NFL Super Bowl is played in Atlanta, guess which event will have the most TV viewers?
The US non-manufacturing conditions survey tomorrow will remain solid, as the manufacturing survey was last week.
Fed Chair Jay Powell has a chance on Thursday to elaborate on the change of policy at the US central bank. But seeing he is meeting educators from across the US, the commentary is seen as being unlikely.
More comments are likely to come from two other senior fed members due to speak tonight, our time – St Louis Fed president James Bullard, a voting member of the monetary policy setting Federal Open Market Committee and Cleveland Fed President Loretta Mester, an alternate member on the FOMC.
In the UK there’s more Brexit confusion and talk of a new deal with the EU, which the EU will continue to reject. The Bank of England on Thursday is unlikely to make any changes to monetary policy. It will also release the latest quarterly report on inflation.
