RBA: On Hold, Wants To See More Evidence Inflation Sustainably In 2-3% Band
The RBA has surprised the market by leaving the cash unchanged at 3.85%. The wide spread consensus in terms of sell-side views and market pricing was for a 25bps cut today. See the link to RBA statement here.
- It appears that the central bank wants to see a little more evidence that inflation is sustainably tracking lower before easing further, it noted in the statement: "With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis."
- It noted international uncertainties remain elevated, even if worst case trade/tariff scenarios are likely to be avoided. The RBA stated that: "Setting aside overseas developments, private domestic demand appears to have been recovering gradually,", as well as "At the same time, various indicators suggest that labour market conditions remain tight." There are uncertainties regarding the outlook for domestic demand and the labour market it added.
- The RBA stated it was well placed to respond to international developments as well.
- Finally, the statement added: "The Board has decided to publish an unattributed record of votes in the post-meeting statement. Today’s policy decision was made by majority; 6 in favour, 3 against."
- Presumably the 3 against the decision were in favor of a 25bps cut.
- At face value, the RBA wants to see more evidence of that inflation will sustainably reach the 2-3% target. At the end of this month the Q2 (and June monthly print) inflation data is out. The next policy outcome is due on Aug 12. Jobs data, with June figures due next Thursday, a likely watch point as well, along with domestic demand indicators.
- In a little under 35mins, RBA Governor Bullock will commence her press conference.
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