RBA: No major surprises from Monetary Policy Statement - MUFG

Derek Halpenny, European Head of GMR at MUFG, notes that there were no major surprises in the MPS, released today by the RBA following its rate cut on Tuesday and the lack of signal or guidance on another rate cut again today has helped lift AUD/USD.

Key Quotes

“The forecasts were largely unchanged with the June 2018 range for core CPI left at 1.5%-2.5%. That range was maintained for the end of 2018 in today’s report. The ranges for inflation throughout the forecast period were all below the 2.0%-3.0% official target implying that the risk is still that the RBA may have to ease again.

So while there was no explicit signal this week from the RBA of further action, the inflation projections do indicate that any external shock would quickly justify the need for further easing. Essentially if everything goes well, the RBA may not have to ease again. But the two risks highlighted by the RBA are very real ones – a further appreciation of AUD and/or China, which “remains an important source of uncertainty” – and one or the other of these risks could bring back speculation of easing before year-end.”