**As seen in Risk In The Week report 06/14/24, subscribe at cablefxm.co.uk/reports
The RBA left its Cash Rate Target unchanged at 4.35% in May, this was in line with economists' expectations, as the central bank has not adjusted monetary policy since November. The board stated that it needs to be confident inflation is moving sustainably to target, this could be interpreted as there's room for progress and that the RBA will not move in line with other developed market central banks. However, some flexibility was provided by a line in the statement, as the board was said not to be ruling anything in or out. Policymakers will need more clarity on the price outlook, as they stated they will rely upon data and their assessment of risk. RBA projections penciled inflation rising 3.8% this year before slowing to 2.8% in 2025, they expect growth to ease to 1.3% in 2024.
As of the time of writing, Cash Rate Futures price in only 16bps of easing for this year, there is a full rate cut priced in by February 2025. Strategists at ANZ stand in line with futures pricing as they have recently pushed their RBA first-rate cut call from November 2024 to February next year. ANZ expects the RBA to deliver only three cuts into the 4Q of next year, however, they warned that risks around the quantum of easing are skewed to two cuts or 50bps in total. For this week, the desk at UBS sees the RBA holding steady while their communications are expected to be hawkish. UBS noted a resilient labor market in Australia despite the softness in 1Q GDP data, the desk expects 2Q CPI data to remain steady.
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