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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

There was no change in the official cash rate at the first RBA Board meeting of the year last week which came as no surprise to the market despite inflation continuing to run below target. The 1.5% cash rate has now been unchanged for six months.

While the popular view remains that there will be no change in the cash rate this year, the market is currently under-pricing the risk of another possible easing. As the RBA Governor noted last week, unemployment has crept slightly higher and there is considerable variation in employment across the country. It also wouldn’t surprise if inflation proves to be stickier than the RBA expects and remain below the 2% to 3% target for longer. The earliest possibility for an RBA move is unlikely to be before the May 7 Board meeting, which will be after the next quarterly CPI data and after three more labour force reports.

Regarding the latest Trump update, markets were buoyed late in the week following the President flagging an impending “phenomenal” tax announcement. That gave markets hope that Trump will at last provide long-awaited details on his fiscal plans (tax cuts and infrastructure spending). Let’s wait for the detail before jumping to conclusions.

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Source: Rural Bank

 

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