Little Changed After SoMP

ACGBs are little changed (YM +3.0 & XM flat) after the RBA has lowered its inflation, wage, and GDP growth forecasts for the year in its quarterly Statement on Monetary Policy, suggesting that its 11 interest rate increases since last May are gaining traction in the economy.

• The RBA estimates trimmed mean inflation at 6% in the year-ended June, down from 6.25% seen three months earlier. The gauge is then likely to ease to 4% in December versus 4.25% previously.
• According to the RBA, the Australian economy is expected to grow by 1.25% this year compared to 2.7% in 2022. By mid-2025, it is projected to slightly increase to 2%.
• The RBA's forecasts are built on the assumption that the cash rate will reach its maximum at 3.75%, which helps explain the unexpected rate hike this week to 3.85%. The RBA's outlook further assumes that the cash rate will reduce to 3% by mid-2025.
• Cash ACGBs are little changed after the statement release with benchmarks flat to 3bp richer with the curve 3bp steeper.
• Swap rates are 1-4bp lower with EFPs little changed on the day.
• Bills pricing is flat to +6 with early reds leading.
• RBA dated OIS is 1-2bp softer after the statement release with 5% chance of a 25bp hike in June priced.
• Housing Finance data for March showed +4.9% m/m after -1.0% in February.