RBA still likely to extend bond purchases further

The Reserve Bank of Australia will revise down its near-term forecasts for the unemployment rate at its meeting on 4th May, but it will probably still signal that inflation will fall short of its 2-3% target for the foreseeable future. As such, we still expect the Bank to announce a third round of asset purchases by mid-year and reiterate our view that markets have gone to far in pricing in rate hikes.