RBA monetary policy meeting Tuesday 4 May 2021 – preview

The Reserve Bank of Australia will leave policy unchanged. 

  • Statement is due at 0430 GMT.  

JP Morgan comment on Governor Lowe’s target for wage growth above 3% (one indicator Lowe needs to see), saying this is “very unlikely” by 2024 (the year the RBA is waving vaguely at to begin the hiking cycle).

Lowe is looking for the jobs market to keep improving, to drive wage growth and thus inflation higher. The latest unemployment rate came in at 5.6% in March, it is falling much faster than the RBA expected only three months ago. On the other hand, Q1 CPI registered core inflation at 1.1%, the weakest ever recorded in the series and way under the RBA 2 to 3% target band. 

Thus, the RBA on hold. Further ahead says JPM:

  • “The RBA ideally wants to generate a shock to expectations and pricing behavior from ‘outside the system’ to jump-start the economy into a regime of higher wage and price expectations”
  • “Staying dovish and running a hot labor market is the conventional approach to achieving such a regime shift.” 

Later this week, on Friday 7 May 2021 the RBA will follow up with its latest Statement on Monetary Policy (SoMP) 

  • The Statement on Monetary Policy sets out the Bank’s assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth. A number of boxes on topics of special interest are also published. The Statement is issued four times a year.

The Reserve Bank of Australia will leave policy unchanged. 

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