MNI RBA Review – August 2024: No Easing In “Near-Term”

EXECUTIVE SUMMARY:

• The RBA left rates at 4.35% as expected and maintained its language but at the margin was more hawkish. It added that policy will need to be “sufficiently restrictive” until the Board is “confident” inflation is “sustainably” moving towards target. The Board remains “vigilant to upside risks to inflation” and continues not to rule “anything in or out”.
• RBA Governor Bullock stated at the press conference that a hike had been discussed today and made clear that in the “near-term” rate cuts are not on the agenda as they do not “align with the Board’s current thinking” with the “near-term being around the next 6 months”. With the outlook as it stands, the February meeting would be the earliest to begin easing.
• During FY25 it will be even more important to focus on trimmed mean inflation. It saw minimal revisions with Q4 2024 +0.1pp to 3.5% with it in the band in Q4 2025, the same as May’s projections. It is now close to the mid-point in Q4 2026, 2 quarters later than previously expected. The return of inflation to the band is likely to be “bumpy” and the Board is “very alert" to upside risks.
• RBA-dated OIS pricing is 5-6bps firmer across meetings beyond September today, with early 2025 leading. A cumulative 20bps of easing is priced by year-end versus 30bps before the RBA decision.

Click her to see full review:

RBA Review - August 2024.pdf