Moody’s Analytics expects to keep cash rate of the Reserve Bank of Australia in April

Moody's Analytics expects to keep cash rate of the Reserve Bank of Australia in April

The Reserve Bank of Australia (RBA) is expected to keep the cash rate and the target on the three-year government bond yield steady at 0.1 percent in its April announcement. 

This was bared by Moody’s Analytics Asia Pacific Economic Preview for the April 5 to 9, where the parameters of the Term Funding Facility are also expected to be maintained.

The Moody’s Analytics said the Australian economy has continued to see a strong recovery in domestic demand, anchored by the substantial expansionary fiscal and monetary support, which has been in place for a year. 

It said addressing the fragility in the labour market caused by the pandemic continues to be top priority for the apex bank, and in recent months there have been stronger than expected gains on this front; the unemployment rate dropped to 5.8 percent in February, with increasingly more full-time positions being created.

Moody’s said this trend may well have some reversal in the short term, with the withdrawal of the government’s JobKeeper scheme in the last week of March.

“However, the growth momentum should largely hold up over the next few quarters and further consolidate the domestic revival,” Moody’s stated. 

“The RBA plans to keep rate hikes on hold until 2024,” the economic preview added.

But Moody’s said, this target will be challenged by the sharp increase in house prices, which is fueling concerns regarding overheating asset prices and reaching unsustainable levels of household debt.

“Our expectations remain that the RBA will respond with tighter lending standards through the implementation of macroprudential measures rather than a rate hike, and this may happen as early as the second half of 2021 if the current acceleration continues, ” Moody’s said.