Economists expect the Reserve Bank of Australia to leave interest rates on hold at its policy meeting on Tuesday but the RBA may also signal that there is no risk of a rate hike any time soon.
Slow progress in raising inflation to its two-to-three per cent inflation target is likely to hold the RBA back from rate hikes throughout 2018 and the first half of 2019, Capital Economics' Paul Dales says.
That is notably later than the general consensus view that the RBA may induce one 0.25 per cent rate hike for November.
A near-term rate hike has been ruled out across the board with few influences materialising since the RBA left rates on hold at 1.5 per cent for the 18th consecutive month at February's meeting.
Capital Economics said despite this, there had been an "unusually high volume" of communication from the RBA, including a policy statement, a statement on monetary policy and three speeches by senior RBA staff.
RBA governor Phillip Lowe last month highlighted that the RBA does not see a strong case for the near-term adjustment of monetary policy, signifying that interest rates will remain on hold in March and possibly for some months ahead, Mr Dales said.
'For an institution that rarely provides such explicit forward guidance, this is a very clear signal," he said in a research note.
While a fall in the unemployment rate from 5.6 per cent in December to 5.5 per cent in January indicated an improvement in labour market conditions, wage growth remains soft and continues to be a concern for the regulator.
Wage growth nudged marginally higher from two per cent in the third quarter of last year to 2.1 per cent in the fourth quarter.
The Reserve Bank will announce its interest rate decision at 1430 AEDT on Tuesday.
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