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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

An unchanged cash rate was widely expected at last week’s Reserve Bank Board meeting and the RBA didn’t surprise on this front. Also not surprisingly, the RBA acknowledged the recent strength in the Australian dollar (which had risen from USD0.7150 at the February meeting to USD0.76 in March) and the possible implications for domestic growth. Other changes to the accompanying statement were relatively minor.

Overall, the RBA retains its easing bias and is focused on the flow of economic data, especially on inflation and unemployment, which are both due to come out prior to the next RBA meeting. As has been the case for some time now, the RBA “remains ready to cut rates if softer demand conditions require that”.

The ongoing debate for some months has been about the cash rate’s path in the second half of 2016. Markets have fully priced in one more rate cut, with a very good chance of a further cut after that. The view among economic commentators remains divided with some seeing no change over the balance of 2016 while the more vocal see the RBA cutting rates later this year.

Implied cash rate pricing from interbank futures market

Implied cash rate pricing from interbank futures market

Source: Rural Bank

 

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