RBA: After May hold, expect cuts in August and November – Westpac

According to analysts at Westpac, points out that the RBA decided to hold the rates steady in May as per their expectations and the language of the decision statement was also consistent with their August/ November timing for rate cuts.

Key Quotes

“Of greatest importance, the Board inferred in the statement that the labour market would have to strengthen further to stay a rate cut(s). In stark contrast, our analysis of the labour market suggests the cyclical sectors have already turned down sharply and that the headline measures will follow from April (a key release for next week).”

“On GDP growth, while the RBA only marked their 2019 GDP growth forecast to trend in May, the data-to-hand continues to point to a much weaker outcome. Note, in this week’s retail trade data for the March quarter, sale volumes were shown to be up just 0.2% over the nine months to March. Ahead, as the labour market deteriorates, house price declines continue and the savings rate lifts, consumption (and consumer-linked investment in the retail sector) will come under further pressure.”

“Across the Tasman, the RBNZ sought to get ahead of the curve by cutting the cash rate 25bps at their May meeting to 1.50%. The RBNZ had previously been betting on stronger growth in the domestic economy getting inflation back to the 2.0%yr target. However, this has not eventuated and hence, given global risks, the RBNZ decided to act.”