The CPI data for the June quarter is published this week. The RBA is completely focussed on this print as the single biggest factor behind a rate decision in August. It is widely expected that a CPI print below 0.5% or annualised at below 2% will mean a second consecutive low CPI print and enough for the RBA to cut the cash rate by 25 basis points. As we have been saying for some time, the RBA will have to look at the CPI target band and the appropriateness of the 2%-3% levels may need to be wound back. A rate cut may not come through if the RBA does decide to adjust the CPI band, but it will be unusual for such a re-balancing act just months before Glenn Stevens leaves his post. Given all this, our call is for a rate cut next week if the inflation print for the June quarter is below 0.5%. The Dollar has eased back to just under 75 US cents.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Industrial Average Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) Iron Ore | As at 22-Jul 1.75 1.90 1.90 1.57 0.7476 0.6783 79.13 4.9860 5,498 2,175 18,570 3,012 45.69 1,322 55.87 | As at 15-Jul 1.75 1.96 2.00 1.55 0.7626 0.6858 80.58 5.0973 5,443 2,161 18,516 3,054 47.60 1,332 58.42 |
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