RBA Considered Postponing Rate Cut – Westpac
Research Team at Westpac, suggests that the RBA minutes earlier in the week were less dovish than expected.
“The key new insight was in the “Considerations” paragraph: “members discussed the merits of adjusting policy at this meeting or awaiting further information before acting.” This lack of urgency cast doubt on an imminent follow-up move so markets reduced pricing for a June cut from over 25% to under 15%. Westpac and most other forecasters expect a cut at the August meeting however, after the July 27 CPI update.
Moreover, with the midpoint of the RBA’s forecasts for CPI remaining at the bottom end of their 2-3% target range over the next few years, risks to our forecast of one further rate cut in August are skewed to the downside i.e. a cash rate below 1.50%. Elsewhere in the minutes, the focus on inflation was re-emphasized, and wage inflation data on Tuesday accordingly became unusually relevant for markets. The wage price index softened to 0.4% q/q, 2.1% y/y, the slowest pace of growth since the beginning of the series in 1997 and thus most likely the lowest in more than 50 years.”