Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Cash Rate Lifted to 1.35%

Wednesday, 6th July, 2022

Daily Flows

  • Flows were relatively unnoteworthy yesterday as many sat on the sidelines for RBA day.
  • Swaps rates rallied after the announcement, with a somewhat more dovish statement from the central bank. We could expect to see deposit rates fall as a result, although strong competition for funding continues to put upward pressure on these levels.

RBA Hikes 50 Basis Points

  • The RBA lifted the cash rate by 50 basis points yesterday, which now rests at 1.35%.
  • Whilst this came as no surprise to the market, the question of ‘What will they do next month’ has started to raise some eyebrows.
  • Several economists have called for another 50 basis points, whilst some suggest that 25 would be more appropriate.
  • The accompanying statement highlighted that consumer spending has remained strong, despite tighter financial conditions. Whilst households have built up bigger buffers during the pandemic, this will be closely watched by the RBA.
  • Truth be told, the RBA will be hoping to see a decrease in consumer spending, as falling demand will alleviate the pressure on supply chains.
  • Q2 CPI is released later this month. If the print comes in hotter than expected, the RBA will be forced into a higher rate hike.

Relief on the Oil Front

  • Oil prices have fallen below $100 USD!
  • The price action is largely driven by recession fears. Slower economic growth will reduce demand for oil.

Lawrence Vosper, Nicholas Allan

Curve Team