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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

We haven’t had to play the “Will they? Won’t they?” guessing game with the RBA for some time.

The last change to monetary policy by the RBA was back in August 2016. However, last week’s unexpectedly low CPI data for the March quarter has encouraged the market to move in the direction of rate cuts with some predicting an RBA move this week.

The market initially moved to price close to 70% chance of a May rate cut but by the end of the month this had been lowered to 45%. A full rate cut is priced by July and financial futures still have a cash rate at almost 1% (two rate cuts) by next year.

Futures Market Pricing Cash Rate pricing over next 12 months

For the record, I am in the minority and not predicting a rate cut this week because the labour market remains in good shape, but acknowledge there is a good chance that the RBA adopts an explicit easing bias in their commentary going forward.

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Source: Rural Bank

 

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