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TD Securities analysts point out that the RBA Statement on Monetary Policy (SoMP) contained a few mixed messages.

Key Quotes

“The RBA claimed that growth would be 2 ¾% (unchanged for 2020, that is).”

“The RBA stepped up its forecast assumption transparency by not just claiming “market pricing” for its rates assumption, but explicitly said “two rate cuts”. For the February SoMP it was implicit that the assumption was one rate cut, but was not made explicit.”

“The RBA has had to downgrade its growth and inflation forecasts over (at least) the last four SoMPs. On this revelation alone we still question why a rate cut wasn’t simply delivered this week.”

“So we are left to reiterate our new base case, which is the Bank delivers 25bp cuts in both August and November to 1%. The RBA will still be monitoring monthly updates of the unemployment rate (RBA flat at 5% through to mid-2021) but at this stage setting up for a cut in August. However, should the labour market rapidly deteriorate, the first cut could be brought forward to July.”