A preview of the Reserve Bank of Australia monetary policy board meeting today

  • The announcement and accompanying statement will come at 0330GMT
  • All surveys of economists / analysts show a unanimous expectation of an unchanged cash rate (currently 2%)

I wrote before the February RBA meeting that the bank is not unhappy with progress in the Australian economy. Sure, there are concerns (low capex & sub-trend growth, as examples), but with strong employment growth in 2015 (but some evidence it will slow in 2016) and inflation around target (also showing some signs it will slow in 2016) the bank is meeting its mandates.

A key concern of the bank is the Australian dollar. The decline of the dollar has 'cushioned' the fall in commodity prices to some extent for the local economy. A floating exchange rate in a relatively small, relatively open economy like Australia's plays that role, an 'external' devaluation rather than an 'internal' one - a floating currency is one key difference between Australia and, say, a small European economy using the EUR. Hence, a key concern of the bank is keeping the AUD from gaining in value. As I said prior to the previous RBA meeting, the bank will make efforts to keep the currency from appreciating. Sure enough, we have heard plenty of jawboning from RBA board members and executives since.

In the Statement from RBA governor Glenn Stevens that will accompany the decision today we should expect more commentary on the AUD and how it should be lower. The emphasis will be on external risks to Australia's outlook. And these can be justified. We heard little else from the G20 than dark forebodings on the global economy, and little in the way of concrete actions proposed (vague urgings for fiscal action). The PBOC RRR cut overnight is evidence of the concerns overseas and will suit the RBA's argument on the risks facing the Australian economy.

I'll be back with the outlook and levels for the AUD.

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More on the RBA today:

  • RBA expected to remain on hold Tuesday ... but expected to cut soon after
  • Is it too early for a preview of the RBA meeting? Nope.
  • RBA meet on Tuesday (Australia time). Here's a real quickie on expectations