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.

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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.

Global headwinds pose risk to outlook

  • The RBA cut the cash rate to 0.75% in October, taking it to a new low.
  • Domestic data has shown little sign of improvement over the past month and employment data has actually deteriorated.
  • The domestic outlook combined with the trend towards lower rates globally drove the RBA’s decision to cut rates again.
  • Current trends, RBA rhetoric and market pricing all suggest that the RBA isn’t finished yet.

Global headwinds pose risk to outlook

  • The RBA left the cash rate on hold at 1.00% in September, as was widely expected after lowering it by 25bp in June and July.
  • Rates globally have remained at or near record lows with a number of other central banks cutting rates the past month.
  • We got a number of updates from the RBA the past month that both provided clarity over the near term outlook but also posed more questions over the long term outlook.
  • Given many keys risks to the outlook lie in foreign political dealing we will likely need to see resolutions in multiple domains before significant and sustainable growth can develop around the globe.

How low can the RBA go?

  • The RBA left the cash rate on hold at 1.00% in August as was widely expected after lowering it by 25bp in June and July.
  • Rates globally have continued to fall with a number of other central banks cutting rates the past months which has seen yield curves flatten significantly.
  • We got a number of updates from the RBA the past week that both provided clarity over the near term outlook but posed more questions over the long term outlook.
  • It is clear more monetary policy easing is coming but what form it takes is open to debate.

RBA Shows Its Hand, Now Where to From Here?

  • As flagged in the aftermath of the June rate cut, the RBA lowered the cash rate again in July, taking it to a new low of 1.00%.
  • Governor Lowe once again highlighted that the decision was not driven by a deterioration in the outlook but rather a revision to their assessment of what constitutes full employment.
  • Lowe continued to stress that monetary policy cannot do it alone and repeated calls for other arms of policy to play their role.
  • Markets continue to price in another cut for early 2020 but the key to the outlook will come in next months Quarterly Statement on Monetary Policy.

RBA Flags More Cuts, Urges Policy Makers Help Share The Burden

  • After leaving the cash rate on hold for 33 straight months, the RBA lowered the cash rate to 1.25% at their June meeting.
  • Governor Lowe stressed that the decision was not driven by a deterioration in the outlook but rather a revision to their assessment of what constitutes full employment.
  • The data, especially employment data, remains the key to the outlook for monetary policy.
  • However the RBA stressed that monetary policy cannot do it alone and has called for other policy makers to play their role.

RBA signals rate cuts are coming

  • The RBA left the cash rate on hold again in May making 33 straight months the cash rate has been at 1.50%.
  • Ongoing deterioration in the data, in particular the latest growth and inflation data, has seen the RBA downgrade their outlook.
  • One of the key technical assumptions underpinning the RBA’s forecasts suggests a change in monetary policy is coming.
  • As a result, the RBA has signalled lower rates are coming and it is now a matter of when, not if, it cuts the cash rate.