RBA Tracker

As you were

The RBA Monetary Policy Board (MPB) today cut the cash rate by 25bps to 3.60% as widely anticipated. The cash rate has now fallen 75bps from the peak.

As we expected, the Board remains cautious and measured in its assessment of the outlook. The Board reiterated that there is a “heightened level of uncertainty about both aggregate demand and potential supply”.

Scanning the Statement gives us the sense that the Bank remains a little uncomfortable about cost pressures bubbling underneath the surface in the Australian economy. The Bank has continued to lean on its forecasts for inflation and wages growth relative to those of its models.

“Our central forecasts for wages growth and inflation continue to incorporate some downward judgement to reflect the possibility that the economy and labour market are closer to balance than our models suggest.”

Staff forecasts contained in the Statement are conditioned on a cash assumption that is ~20bps lower than in May. The cash rate is assumed to settle around 3-3.1% so incorporate roughly two more 25bp cash rate cuts over time.

Key forecasts for the unemployment rate and underlying inflation are characterised in the Statement as unchanged from the baseline forecast in May.