Daily Commentary BY THE CURVE TEAM –


2nd of June, 2020

The RBA is set to meet for the June Board meeting today where the focus will be on what they have to say on the outlook.

It is the first Tuesday of the month again which means it is time for the RBA Board to convene and discuss monetary policy. No change to the current setting of monetary policy is expected at the meeting, something that is likely to be the case for some time. The focus will be on what they have to say about the outlook.

Based on what Governor Lowe has had to say, the RBA is likely to become a narrator rather than an integral driver of the outlook going forward. In his appearance before the Covid-19 parliamentary committee last week, he basically said that the RBA has done all it can and it is now up to the government to shoulder the load.

Of course they can buy more bonds if they deem that lowering the risk free yield curve is warranted or bond markets start playing up again. Outside of that, with Governor Lowe emphatically ruling out negative rates, there isn’t a lot left to do. So it is what they have to say about how the economy and the outlook is evolving which will be of greater focus for some time.

Data yesterday and market price action will certainly make their discussions interesting. The monthly inflation data posted a sharp fall, both in headline and core terms, in May. House prices have started to roll over and the AUD continue to climb as the USD weakness continues on the back of the huge amount of Quantitative Easing the Fed is undertaking.

There will be plenty more data today that will also stoke discussions. The latest weekly consumer sentiment survey is out this morning. It will be followed by a number of GDP partial indicators which will help economists finalise their predictions for tomorrow’s final number. The market is still expecting economic activity to have fallen 0.4% in the first quarter, however that could change after today’s data.

David Flanagan

Director - Interest Rate Markets