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In view of analysts at ANZ, the Reserve Bank of Australia’s Statement on Monetary Policy (SoMP) has provided the detail around the bank’s forecasts that were partially revealed on Tuesday.

Key Quotes

“We note that the RBA’s forecasts assume 50bp of rate cuts, yet only succeed in getting inflation a touch above 2% by the end of the forecast horizon.”

“That means the RBA is poised to ease, in our view, especially given its concern that “an extended period of inflation below the target range could lead to a further decline in inflation expectations.”

“On a positive note, the RBA suggests a lower rate of unemployment is achievable, while also having inflation consistent with the target.”

“The reference to the Board “paying close attention to developments in the labour market at its upcoming meetings” suggests each meeting is ‘live’. But we struggle to believe the Bank will ease on a single month of higher unemployment. We think it will take continued lack of progress on unemployment falling and inflation remaining low. This implies June is unlikely. But it is difficult to be confident of this call ahead of the Governor’s speech on 21 May, which we trust will provide some additional clarity around the RBA’s reaction function. We remain of the view that 50bp of easing will be delivered this year.”