Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities, points out that the RBA cut the cash rate today to a record low of 1% and is the first time it has cut the cash rate in consecutive meetings since 2012.
“On balance this is a dovish statement compared to neutral toned statements when the Bank has cut the cash rate in the past.”
“The Bank essentially kept the last paragraph from its June statement, but made a small tweak indicating it could adjust monetary policy 'if needed'. This suggests the RBA is willing to cut the cash rate further.”
“With 2 cuts delivered as per the Bank's forecasts and no major changes to the Bank's medium term GDP or CPI forecasts, it does suggest the Bank can buy itself time and move to the sidelines.”
“Our current RBA cash rate profile assumes the Bank moves to the sidelines, with a deterioration in the labour market bringing the Bank back in play, cutting again in Nov.”
“The clear risk is for the Bank to cut earlier than we forecast.”
“While we don't anticipate an August cut, it cannot be ruled out.”
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