Goldman Sachs on the Reserve Bank of Australia today
From the RBA's perspective, the central bank will likely remain typically tight-lipped on the implications of Australia's political situation. However, there is no escaping that global (i.e., UK referendum) and now domestic politics are presenting headwinds to sentiment and growth.
Given the balance of risks, expected weak 2Q2016 inflation and stalling employment growth, we expect the RBA to reintroduce an easing bias at July's meeting and to cut rates in August (GSe: -25bpts).
We expect the uncertainty around Australia's political environment and renewed risks to Australia's public will be AUD-negative and place some upward pressure to bond yields.
