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RBA eases inflation views in policy statement

Friday, May 06 2016
The Aussie fell in Asia Friday after the Reserve Bank of Australia lowered its inflation views in its Statement of Monetary Policy. "The Reserve Bank of Australia’s new forecast that underlying inflation will remain below the 2-3% target range until the middle of 2018 supports our long-held view that interest rates will be cut again to 1.5% before long," Capital Economics said in a note to clients.
"After previously forecasting that underlying inflation would be 2.0% this year and around 2.5% next year, the RBA has concluded that it will stay at 1.5% in the second quarter and will stay below 2% all of next year. Part of the downward revision is due to the fact that underlying inflation fell much further than the RBA expected in the first quarter. But the Bank has also concluded that wage growth will remain lower for longer. The clear implication is that monetary policy will need to do more to boost underlying inflation. Tuesday’s 0.25% rate cut to 1.75% will probably be followed by another cut in August."
 
Aussie is currently being traded around 0.7370 area. Pair is likely to find support around 0.73 handle and resistance above 0.7440 level. Later today, in the US session, NFP figures will be released.
Last modified on Friday, 06 May 2016
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