- Prior 4.35%
- Decision today was unanimous
- Headline and underlying inflation are still too high
- Heightened uncertainty remains on economic and inflation outlook
- Resolution of the conflict in the Middle East is at an early stage
- There are plausible scenarios where inflation is higher, activity lower than envisaged under the May forecasts
- Global oil supply issues will take some time to resolve
- That will maintain upward pressure on global energy prices and inflation
- Inflation is likely to remain high for some time
- RBA focused on ensuring that inflation does not become embedded as impact from higher oil prices pass through
- Appropriate to leave the cash rate target unchanged while assessing the response to previous interest rate rises and the impact of the oil supply disruption
- Full statement
The decision is very much expected as the RBA signals that they are likely to stay on hold for some time now.
The more important detail is the language on inflation I would say, and that suggests the central bank will be in no hurry to act next again. That especially as Middle East developments are also looking up, at least for now, with the US-Iran framework agreement in focus.
Whether or not the Strait of Hormuz reopening will really help and by how much, is a question for another day for markets and the world. That especially as we still don't know what the real traffic flow will be and not the one that the US and Iran will look to advertise and upsell in this deal.
Circling back to the RBA, they used a couple of these terms in May:
- "Likely to have second-round effects on prices for goods and services more broadly"
- "Inflation is likely to remain above target for some time and that the risks remain tilted to the upside"
Both descriptions of the inflation outlook were removed from the June statement and reworded as such:
- "Higher fuel prices.. passing through to the prices of other goods and services, so inflation is likely to remain high for some time"
- "Inflation is still too high" while emphasising on having raised the cash rate three times already this year
AUD/USD sits at 0.7050 on the day, little changed from before the decision. A non-event as you would expect. So, let's wait to hear from Bullock later next.
