TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'

MNI BRIEF: Canada NDP Will Bring Nonconfidence Motion In Jan.

CANADA NDP SAYS WILL INTRODUCE NONCONFIDENCE MOTION

MNI China Daily Summary: Friday, December 20

MNI: PBOC Net Drains CNY103.5 Bln via OMO Friday

MNI: PBOC Sets Yuan Parity Lower At 7.1901 Fri; -2.13% Y/Y

EZ/UK T-Bill Calendar: Greece to Sell Bills Monday

EZ/UK Bond Supply Calendar: BOE APF Sales Due 6 January

MNI: BELGIUM DEC BNB BUSINESS CONFIDENCE -13.8

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

RBA: Inflation In Band In 2026 With No "Near Term" Rate Change

RBA
Central Bank NewsForeign Exchange BulletsAPACAustraliaBulletMarketsFixed Income BulletsRBA

The minutes noted that “more than one good quarterly inflation outcome” would be needed for it to be “confident” that inflation was sustainably returning to target, if it turned out that the temporarily lower headline inflation resulted in a greater drop in inflation expectations and indexation. Q4 CPI is released on January 29 and Q1 at the end of April, thus May 20 may be the earliest meeting for a rate cut, consistent with current market pricing. The RBA remains ready to “adjust” policy. 

  • The Board observed that the OCR assumption used in the updated forecasts, based on market pricing, didn’t include “any change” in the “near term” – a return of the phrase that Governor Bullock used a few months ago to dampen rate cut expectations. With the economy developing as expected and staff projections evaluated as “consistent” with the Board’s “strategy”, there was no “need” to change rates. The market has the first full 25bp rate cut in May 2025.
  • The RBA’s OCR profile includes close to one 25bp rate cut by mid-2025 with almost another two by end-2025 followed by one in H1 2026.
  • With the risks around its forecasts “balanced”, the Board is prepared to change rates in either direction and discussed scenarios that would drive a shift or a continuation of the prolonged hold.
  • It discussed downside and upside surprises to consumption growth from consumer confidence and household wealth & cash flows, and the labour market from staff hoarding. Its business liaison programme was yet to widely report layoffs and no intention to fill vacancies.
  • The supply side was seen as a risk that may require tighter policy if the estimate of potential growth was “too optimistic” and productivity continued to disappoint. The other upside risk is if rates are not as “restrictive” as the Board believes and it is monitoring bank lending and asset prices to judge this.
  • Risks from overseas cannot yet be estimated due to a lack of detail. 
324 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.

The minutes noted that “more than one good quarterly inflation outcome” would be needed for it to be “confident” that inflation was sustainably returning to target, if it turned out that the temporarily lower headline inflation resulted in a greater drop in inflation expectations and indexation. Q4 CPI is released on January 29 and Q1 at the end of April, thus May 20 may be the earliest meeting for a rate cut, consistent with current market pricing. The RBA remains ready to “adjust” policy. 

  • The Board observed that the OCR assumption used in the updated forecasts, based on market pricing, didn’t include “any change” in the “near term” – a return of the phrase that Governor Bullock used a few months ago to dampen rate cut expectations. With the economy developing as expected and staff projections evaluated as “consistent” with the Board’s “strategy”, there was no “need” to change rates. The market has the first full 25bp rate cut in May 2025.
  • The RBA’s OCR profile includes close to one 25bp rate cut by mid-2025 with almost another two by end-2025 followed by one in H1 2026.
  • With the risks around its forecasts “balanced”, the Board is prepared to change rates in either direction and discussed scenarios that would drive a shift or a continuation of the prolonged hold.
  • It discussed downside and upside surprises to consumption growth from consumer confidence and household wealth & cash flows, and the labour market from staff hoarding. Its business liaison programme was yet to widely report layoffs and no intention to fill vacancies.
  • The supply side was seen as a risk that may require tighter policy if the estimate of potential growth was “too optimistic” and productivity continued to disappoint. The other upside risk is if rates are not as “restrictive” as the Board believes and it is monitoring bank lending and asset prices to judge this.
  • Risks from overseas cannot yet be estimated due to a lack of detail.