The Reserve Bank of Australia monetary policy board meeting is today , with the announcement scheduled at 2.30pm local time, 0330GMT. After last month's surprise from Glenn Stevens, cutting rates without any change in forward guidance, which smelled of a bit of panic about cuts from other central banks (before and, subsequently, since) and the potential impact on the Australian dollar, the question today is will there be another?

The market fully expects another cut in or before May ... but for today ... it's a line-ball call.

The economic backdrop is

  • Weak commodity prices (impacting on Australia's terms of trade and foreign receipts)
  • Weak consumer and business confidence (though consumer sentiment did show some recovery in the latest February survey)
  • Unemployment rising (at its highest since 2002)
  • Yesterday we got weak company profits and a run-down in inventories, which will subtract from Q4 GDP (we get Q4 GDP on Wednesday)
  • Last week we got capex data, with the expected weak mining capex but also weaker than expected non-mining capex intentions, weak business confidence tightening corporate investment purse-strings.
  • The arguments are certainly there for another cut ... as they have been for months towards the end of 2014 (when the RBA held off)
  • International developments are a still weak China, a still weak Europe (but showing signs of improvement, albeit tentative and patchy), a slowly improving Japan, and an improving US

Then, there's the dollar. The AUD is around a cent off its post-February rate cut lows. While I hesitate to say the RBA will be happy about the level (are they ever?), it is moving in their desired direction.

Against this is the strong local property market and surging credit growth amongst property investors. This will be a factor in today's decision and it may well be very much front of minds at the board meeting. Why? Twice a year the RBA publishes its Financial Stability Review, in September and in March. At the board meetings ahead of publication (i.e. today) RBA staff in the financial stability areas of the bank brief the board on the semi-annual assessment. Back in the accompanying statement to the September meeting announcement (i.e. after a briefing from the stability staff) particular concerns were voiced about the property market and its risks to macroeconomic stability. The statement notably pointed out the risk of further house price inflation (which is what we have since seen). Today's board decision is a near line-ball decision (latest pricing for a cut is at 59%), concerns over property prices may well be enough to tip the decision in favour of a hold.
For those with us on Monday during the Asian shift, you'll recall my tip is for no cut today. But it's a low-confidence call ... this could go either way today.