Just over a week ago, the Reserve Bank of Australia shifted its monetary policy stance to a neutral bias, saying that “the most prudent course is likely to be a period of stability in interest rates”. Subsequent economic data releases were on the positive side and supported the view that the RBA’s easing bias was no longer appropriate.
Then, last week, we got weaker than expected employment numbers for January, with the unemployment rate jumping up to 6%. This is the highest level in more than a decade (since July 2003) and higher than during the GFC – a position that may unnerve consumers. Markets temporarily reacted but then realised that the RBA has forecast an unemployment rate a lot higher going forward so it should have been no surprise. If anything, this simply reinforced the message that rates will be “lower for longer”, with no move (in monetary policy) expected for some time.