• The RBA left the cash rate unchanged at 2¾% at the June Board meeting, as widely expected.
• A “no change” decision was almost universally predicted by economic commentators (ie 23 out 25 market economists) and financial market operatives. Financial markets had factored in only a modest 20% chance of a June RBA move.
• The existing (albeit fading) easing bias was reaffirmed, with the RBA noting that, “the inflation outlook…. may provide some scope for further easing should that be required to support demand”.
• We see the RBA slicing the cash rate by another 0.25% to 2½% in August, after a likely benign QII CPI (released in the last week of July). Markets have factored in a 100% chance of a 2½% cash rate by early 2014.
Read full report: Market Research
Commonwealth Bank