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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

The March quarter CPI data last week surprised the market on the lower side of estimates and has resulted in a large shift in expectations for an RBA rate cut as early as May (from under 10% pre-CPI to around 65% currently) which has seen a sizeable rally in short term yields, a fall in the Australian dollar and our share market close the week at a record high.

While inflation was not on the RBA’s radar as a trigger to move monetary policy, this lower than expected result makes the RBA’s task to restore inflation to the 2% to 3% range even more difficult – hence the change in market expectations. Markets are pricing around 50 basis points of cuts by early next year – including a 50% probability the RBA cuts in early May.

Futures Market Pricing Cash Rate

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Source: Rural Bank

 

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