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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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.

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.