Daily Commentary BY THE CURVE TEAM –

Key Data Could Sway RBA

22nd of January, 2020

After a run of softer data and the effects of recent natural disasters to flow through, the upcoming data could sway the RBA.

The market currently has the probability of a rate cut at next month’s RBA meeting at around 50/50, which will put an increased onus on the key data due over the next week. The debate amongst economists continues to rage as some argue there is little risk to adding more stimulus while others think it will have limited impact anyway.

Today’s consumer confidence will be the first of the three major releases between now and the February meeting. The weekly surveys suggest there is further downside risk to consumer confidence, which would see the headline index sink further below the 100 level that separates optimists and pessimists.

Much of the consumer confidence outcome will depend on how consumers think recent natural disasters will impact the economy. What will be of more importance to the RBA is the actual impact of the recent fires and floods, the extent of which – especially the long run impacts – could take some time to quantify.

Tomorrow will be the most important of the three releases with the latest employment data due for release. This will then be followed by the Q4 consumer price data which is once again unlikely to show any sign of a pick up in inflation. That could change this quarter as supply disruptions of fresh produce impact prices.

David Flanagan

Director - Interest Rate Markets