Economists as Westpac see August cut
The OIS market is pricing a 10% chance of a second-consecutive surprise RBA cut today at 0430 GMT.
Barring a surprise, economists will be looking for a hint on whether a cut is coming in July, August or later. Economists at Westpac see an August move.
Economists Bill Evans writes:
The main reason why we expect an August move is because the Bank is forecasting that, having cut rates in May and assuming "market pricing" on the interest rate outlook, it still only expects underlying inflation to reach 2% - the bottom of the 2-3% target zone - in 2017. At the time of the Statement on Monetary Policy in May, "market pricing" implied a further cut by the Bank over the next six months or so. Therefore, without a second cut, it would not have been able to forecast inflation would even reach the bottom of the target range in 2017.
In the bigger picture, they note that while growth numbers soared past estimates in Q1, the inflation picture still remains low. In the same GDP report, it showed falling wages and inflation. They say the RBA is likely to look past the strong growth data and cut again, just not yet.
