ANZ analysts suggest that the Reserve Bank of Australia is likely to cut the cash rate further in coming months, but they no longer expect a move at the Board’s August meeting next week.
Key Quotes
“The June quarter CPI, which was in line with the Bank’s forecasts, provides some flexibility, as it wasn’t the smoking gun that some expected.”
“Governor Lowe suggested last week that the RBA is prepared to watch the data for a period to determine whether “we’re going to need further stimulus”.”
“Market pricing pared expectations of an August rate cut.”
“We expect the RBA’s forecasts, which will be updated in the Statement on Monetary Policy on Friday, to explicitly acknowledge the high likelihood that further rate cuts will be needed to get unemployment down.”
“That could result in a communication problem for the RBA, as it did at the Board’s May meeting. The forecasts will show that monetary policy likely needs to be eased further to get to where the RBA wants to be, but the Governor will want to wait for further data.”
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