RBA: RBA Keeping Options Open In Face Of Significant Global Uncertainty
Apr-01 04:10
The RBA left rates unchanged at 4.10% today, as was widely expected given the cautious tone following February’s 25bp cut. One of the largest changes to the statement was what was not included. February’s comment that “the Board remains cautious on prospects of further policy easing” was removed, thus it’s keeping its options open going forward given that “underlying inflation continues to ease” as expected, but it is still “cautious about the outlook”. Policy remains restrictive but its reduction at the previous meeting was omitted.
- As expected, the RBA looked through the drop in employment in February repeating that “labour market conditions remain tight” as underutilisation is “relatively low” and businesses continue to “suggest that availability of labour is still a constraint”. However, the risk that the labour market could be tighter than the RBA thinks was removed from the statement.
- The paragraph on upside risks was also excluded with risk “on both sides”. However, the tone on private demand was more positive as it “appears to be recovering” and “real household incomes have picked up” with “some measures of financial stress” easing. But soft demand continues to make passing on higher costs to customers “difficult”.
- Given that US reciprocal tariffs are due to be announced this week, there were further comments on this issue including that inflation “could move in either direction”. They are impacting “confidence globally” which would “likely be amplified” if tariffs increase or there is retaliation. The developments are expected to weigh on global growth.
- Deputy Governor Hauser said that changes to the Board’s communication would be discussed at this meeting. There was no mention of it in the statement but Governor Bullock is likely to be questioned on this at the press conference at 1530 AEDT.
- Statement can be found here.
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US OUTLOOK/OPINION: A Stacked Week Ahead For US Macro
Feb-28 21:45
- Next week sees a series a key risk points, starting with trade policy and Trump’s Mar 4 deadline for an additional 10% tariffs on China (for 20% total) and the imposition of the delayed 25% tariffs on Canada and Mexico. US Treasury Sec Bessent offered a potential offramp here, saying Friday afternoon the US wants to see Canada and Mexico match tariffs on China. Whilst following through with that could see temporary de-escalation in US trade tensions with Canada and Mexico, it would likely stoke greater likelihood of China retaliation and/or further fiscal support.
- It’s bookended by ISM manufacturing (Mon) and services (Wed) reports, watched to see whether sharp increases in manufacturing prices paid seen in other surveys first show up in this broader measure and whether there is sign of spillover to services.
- The main data release of the week comes on Friday though, with the nonfarm payrolls report for February.
- The January report saw a modest miss for nonfarm payrolls but it was more than offset by a robust two-month net revision along with a smaller than expected benchmark revision. Further, the unemployment rate again surprised lower at 4.0% for its lowest since May 2024 in a further step away from the 4.3% the median FOMC member forecast for 4Q25 in the December SEP.
- Early days for the Bloomberg survey see nonfarm payrolls growth at a seasonally adjusted 155k in February and for the unemployment rate to hold at that lower 4.0%.
- Note that the nature of the DOGE “deferred resignation program”, with some 77k federal employees accepting the offer, shouldn’t see any direct impact on payrolls growth (in the establishment survey) until the October report as workers will remain on the payroll in the interim. One area where the direct impact could show however is the household survey. Assuming those who accepted the offer are treated as equivalent to a furloughed worker, they’ll register as unemployed. A word of caution though, it’s a much more volatile survey, with a 90% confidence level of +-600k for employment vs +-136k for payrolls.
- Note that post-payrolls Fedspeak sees a notable addition this time, with Fed Chair Powell set to talk on the economic outlook with both text and Q&A, starting at 1230ET. Data and tariff deliberations should still set the tone, but at this juncture we wouldn’t be surprised to see a continued call for patience in rate cut expectations considering dovish repricing seen over the past week. This is a theme that could be seen from other notable Fedspeakers throughout the week, including permanent voters Williams, Waller and Kugler.
STIR: Significant Dovish Repricing In US Rates This Week
Feb-28 21:14
- The softer growth outlook has dominated signs of renewed inflationary pressures this week - see a key summary of the week's macro developments in the MNI US Macro Weekly here.
- Fed Funds futures have a next 25bp Fed cut now fully priced for June and over the week have added nearly an entire 25bp cut over 2025 with a cumulative 70bp of cuts vs the 50bp implied by the median FOMC dot in Dec.
Significant dovish adjustment over the week:
MACRO ANALYSIS: MNI US Macro Weekly: No Escaping Tariff Distortions
Feb-28 21:12
- We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week.
- Please find the full report here: https://media.marketnews.com/US_macro_weekly_250228_3f0cf485bb.pdf
