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Weekly Economic Commentary

Weekly Economic Commentary

Categories: Commodities, General

Poor communication around last month’s unexpected rate cut by the RBA, including weak guidance, has left financial markets guessing about the timing of the next cut. There is a 50% probability currently priced in for another move this week (refer chart below) but it should make very little difference whether this is delivered Tuesday or put on hold for a month.

30-day futures market pricing for the RBA cash rate

Of more importance is that the RBA’s accompanying statement should maintain an assessment that allows the market to continue to price in the prospect of further rate cuts down the track, even if rates are lowered again this week.

There is however one wildcard, being Federal politics, given the media speculation late last week. A change of Prime Minister (and Treasurer), effectively a de facto change of government, might restore some of the fading confidence and lean the RBA towards leaving rates unchanged. But both these forecasts are, in my opinion, quite remote.

Source: Rural Bank

 

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