Monthly Insights BY THE CURVE TEAM –

With over 100 years of collective financial markets experience behind us, we have created Curve’s monthly insights, highlighting important global economic data and providing in-depth analysis to help you better understand the current economic climate.

Our most recent monthly insight papers are available for download with our compliments.

A big unknown hanging over the outlook

  • The focus is quickly shifting from the containment of Covid-19 to winding back the containment measures and opening up the economy.

  • Monetary policy remained unchanged over the month with the RBA remaining “committed to do what it can to support jobs, incomes and businesses”.

  • In their quarterly Statement on Monetary Policy the RBA revealed their latest forecasts as well as other scenarios.

  • Given the unprecedented nature of recent events, there is considerable uncertainty over the outlook with the RBA facing a great unknown.

Slower for Longer

  • The outlook for the economy continues to develop as the fight to contain Covid-19 remains the focal point.
  • At their emergency meeting the RBA cut the cash rate to the lower bound of 0.25% and commenced quantitative easing to support the economy.
  • Volatility across markets has continued with the focus on the health fight, not the longer-term implications for the economy.
  • While the near-term outcomes will be determined by the health crisis, longer term implications are starting to emerge.

Rapidly Deteriorating Outlook Has Everyone On Edge

  • The outlook for the economy has shifted dramatically in March amid further spreading of the Covid-19 Virus and outbreak of an oil price dispute between Russia and OPEC.
  • This saw the RBA cut the cash rate to 0.50% in March with a promise of further easing, along with fiscal support from the federal government.
  • Market instability was a broad theme throughout the month as Covid-19 and Oil disturbances caused heavy sell-offs and impacted investor confidence.
  • With uncertainty about the extent of the virus outbreak, emergency fiscal and monetary policy measures may be required with the only certainly being a continued volatility for the immediate short term.

History Repeating Itself

  • The RBA left the cash rate on hold at 0.75% in February, as was widely expected.

  • Recent employment and inflation data was enough to support the RBA’s ‘gentle turning point’ narrative. 

  • In their recent commentary the RBA outlined what would be seen as a trigger for further rate cuts.

  • Despite the RBA’s panglossian view on the outlook, risks remain skewed to the downside.

RBA assessing all options

  • The RBA left the cash rate on hold at 0.75% in November as was widely expected.
  • Markets have priced in another interest rate cut for May next year where last month it was considered closer to a 50/50. 
  • Despite the RBA’s best efforts to remain optimistic about the outlook, data for the retail and consumer segments of the economy remain weak.
  • Risks remain skewed to the downside.

Wage growth hope evaporates

  • The RBA left the cash rate on hold at 0.75% in November as was widely expected.
  • Market pricing for further action from the RBA has eased, in line with lower expectations of further monetary policy easing globally.
  • Despite their best efforts to be optimistic about the outlook, the RBA contained a blunt message around wage growth and its implications for inflation and the broader outlook.
  • As a result, risks remain skewed to the downside.