RBA outlook

In Australia, the minutes from the RBA’s last Board meeting confirmed that the door is wide open for another rate cut at its August 2 meeting. While not as direct as the Reserve Bank of New Zealand, the RBA indicated that it was waiting on further information on inflation, the labour market and the housing market and the next update of the RBA’s economic forecasts. Since it has described the labour market and the housing market as “mixed” and recent data on both suggest no reason to change that assessment, the implication from the RBA is that should we see another low inflation reading when the June quarter CPI numbers are released on Wednesday then it’s likely that the RBA will cut the cash rate from 1.75% to 1.5% on August 2. A CPI outcome of 0.4% quarter on quarter for headline and underlying – which is what we expect – would likely be enough to see the RBA cut again.

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