The RBA July meeting is today, a quick preview via Westpac, in brief
(ps. Adam has a technical analysis preview here)
- The RBA will not be so naïve as to think we have seen the last of 'Brexit'-related risks
- But as the situation currently stands we do not think events are sufficient to 'spook' the Bank into an 'emergency' cut in July
- We instead expect the Bank to keep rates on hold, opting to keep a close watch on events as they unfold and be guided near term by the Q2 CPI print due to be released on July 27th
- While the cash rate is unlikely to move, we will see some changes in the Governor's decision statement.
- The key question here is whether the Board chooses to make more 'forward-looking' comments and/or signal a clearer easing bias.
- The July Governor's statement will likely just acknowledge the 'Brexit' event and associated uncertainties but continue to give little or no near term policy guidance.
- It could put forward a clearer 'framework' for future decisions - e.g. by indicating in the closing paragraphs that it would be monitoring the 'Brexit' shock and the inflation outlook - but in our view that would stop short of a clear signal of an intention to cut.
WPAC Looking further ahead:
- Come August through, if the Q2 CPI comes in as expected, the weak inflation outlook will give a clear cut case for a further 25bp cut.
- Beyond August, the nature of the inflation undershoot and how the RBA views the appropriate policy response will become the main factors influencing policy. We expect from August on the Bank will be inclined to keep rates on hold for an extended period
(Boldings above are mine)
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While you're down here ... the consensus of expectations of surveyed economists is pretty much unanimous - an on hold decision today.
