The Australian Reserve Bank (RBA) cut the cash rate at 25 basic points to 3.85%, as we expected. The policy statement and the subsequent press conference of Governor Bullock were perceived as moderate. An escalation in commercial tensions or weakness in the labor market could promote a more aggressive policy relief by the RBA, reports Standard Chartered economist Nicholas Chia.
25 basic point cut a decision of ‘consensus’
“The RBA reduced the cash rate in 25 basic points to 3.85% at its monetary policy meeting on May 20, as we expected and the market. But we were surprised by moderate nuances both in the Monetary Policy Declaration (Somp) of the RBA and in the subsequent press conference of Governor Bullock, where he characterized the rate of rate as a ‘confident cut.'”
“Our interpretation of the RBA policy decision is that it is granting more weight next to the labor market of the dual mandate, now that the average trimmed inflation has once again been within the target range of 2-3%. In the last line of the policy declaration, he replaced the reference to ‘return inflation to the objective’ by ‘focused on his mandate to deliver price stability and full employment’. The Somp declared that the risks have become more ‘Balanced’, while the RBA had warned about the slowdown in disinflation in the February Somp.
“We keep our forecast of only one cut more than 25 basic points in the third quarter, carrying the terminal cash at 3.60%. Our baseline differs from what is discounted by the market (approximately 67 basic points of cuts, or 3.2% by the end of 2025), but we wait Somp, since these meetings are held after the publication of the quarterly CPI with updated economic forecasts. “
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
