No surprise that the RBA is a snooze today. Everyone expects the RBA to hold policy steady at 3.5% – though some folks on the shadow RBA are calling for a hike (see here).
With the decision not in doubt, focus ought to turn to the RBA’s bias.
I expect that their formerly strong easing bias will now be a weak easing bias. Since the June meeting, global growth data have not really changed (at a stretch you might argue that the lower US Manu ISM requires a downgrade), and financial market conditions have been stable at only a modestly stressed level. Thus, the global picture is not going to drive this meeting (on Europe i would guess they might say – a good step, but there is a lot left to sort out).
The domestic data has been okay – but i will be surprised if they upgrade to above trend. Real GDP was much stronger than they expected – though i would guess they have their doubts about the real/nominal splits. More importantly, the trend unemployment rate remains stable in the 5% to 5.25% range it has traced for a well over a year – so they may upgrade to ‘around trend’.
There have been no new inflation data – though the stability of the AUD and improvement in productivity (to the extent you believe the Q1 national accounts) will have allayed some of the worries about the upside risks to their inflation projection.
With most things stable, i expect that the RBA will say that the level of rates is appropriate – but note that risks remain tilted to the downside. I would say that this is a weak easing bias.
I doubt that this is the end of the easing cycle – but it is possible to imagine the RBA on hold until November. By November i expect to see clearer evidence that unemployment rate is rising toward 5.75% in Q1’13, and confirmation that underlying inflation is running around 2%.