Daily Commentary BY THE CURVE TEAM –


1st of May, 2018

The data pulse so far this week has remained on trend with the latest released from China and the US still the shinning light in a global economy that is starting to slow. Today the focus will shift to the RBA where there is a possibility that we could see an update to the outlook.

With the Quarterly Statement on Monetary Policy looming large on Friday and an appearance from Governor Lowe at an RBA dinner in Adelaide, it is an opportune time for an update to the outlook.

The question is; what would that update entail?

There is a case to be made that we could see an upgrade to the outlook for inflation following the most recent CPI release. While the headline index remained soft, the core read looks increasingly like bottoming, much like recent wages data.

We could also see growing concerns over the outlook for the consumer as the fallout from the Banking Royal Commission gathers pace. An already challenging environment for the Banks is being made worse by ongoing revelations that could lead to a credit crunch. With the housing market already under pressure and a weak outlook for wages, the consumer and their ability to spend is the biggest risk to the outlook.

Given the RBA’s track record, we could also simply see more of the same from the RBA as they continue to monitor the incoming data in the context of the broader outlook. The key is that the cash rate is expected to remain on hold, for how long is the question?

David Flanagan

Director - Interest Rate Markets