We reported mid-week that the RBA delivered a 25 basis points cut in the cash rate at the May meeting held on 3 May. On Friday, the RBA released its statement of monetary policy (SOMP). The RBA considered the accommodative monetary policy of the ECB and the US Fed's continuation of the reluctance of raising the US cash rate despite strong US domestic data in framing its monetary policy. Against this backdrop, the March quarter inflation number of -0.2% was enough for the RBA to reduce the cash rate to a record low of 1.75%.
The SOMP forecasts GDP growth to remain within the 2.5% - 3.5% band and weak inflation within the 1.5% - 2.5% band over the forecast period up to 2017/18. This outlook suggests that the RBA is likely to ease further and deliver a further rate cut in the coming months to get core inflation within its long term target of between 2.5 and 3.5% band. Following the release of the SOMP, the dollar eased further and slipped back to US 73 as shown in the chart (Source: Thomson Reuters) below.
The SOMP forecasts GDP growth to remain within the 2.5% - 3.5% band and weak inflation within the 1.5% - 2.5% band over the forecast period up to 2017/18. This outlook suggests that the RBA is likely to ease further and deliver a further rate cut in the coming months to get core inflation within its long term target of between 2.5 and 3.5% band. Following the release of the SOMP, the dollar eased further and slipped back to US 73 as shown in the chart (Source: Thomson Reuters) below.
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 Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) *Iron Ore 60% MBIOI-IR index USD/t (Updated Wednesday) | As at 6-May 1.75 2.00 2.34 1.78 0.7394 0.6487 79.27 4.8107 5280 2057 17740 2913 46.25 1285.70 58.33* | As at 29-Apr 2.00 2.27 2.51 1.83 0.7655 0.6721 82.15 4.957 5,252 2065 17,773 2938 47.37 1293.53 60.97* |
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