Greg Gibbs, analyst at Amplifying Global FX Capital, notes that the RBA has recently moved from a mild tightening bias to a neutral bias in early February.
Key Quotes
“It did not reveal as much in its 5 February policy statement; it retained its message that progress towards reaching its inflation target was “expected”, but “likely to be gradual”, continuing to say nothing that might hint of a change in rates in coming meetings.”
“As such, any shift in tone in the 2 April policy statement will be a significant surprise; it would suggest that the RBA can see a high probability that it may cut rates within a few months.”
“A key question RBA staff might ask themselves is: can they continue to say there is likely to be a gradual return to its inflation target centred at 2.5%? If not they may need to remove this assertion from their policy statement. In its place, the RBA might note, as the RBNZ did, that the balance of risks to their outlook has shifted to the downside.”
“The RBA is unlikely to explicitly say, at least in its policy statement, that the next move in rates is more likely to be a cut, but the market will presume as much if the RBA notes that the balance of risks has changed.”
“We think that there is a good chance that the RBA makes such a shift in tone in its policy statement next week, and this will be meant to convey some guidance that rate cuts are on the table.”
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