The release of this month’s RBA board meeting minutes suggest the bank is currently happy with the rate of growth in the economy and settings. That suggests the RBA is in no hurry to lower the cash rate again anytime soon.
“Recent data on the domestic economy had generally been positive,” and “GDP growth had picked up in the March quarter to be about half a percentage point stronger than expected. Growth over the year had increased to be a bit above estimates of potential growth, reflecting a stronger expansion in non-mining activity,” the minutes said.
While they also reflected the reality that inflation expectations across the economy “had remained below average”, which biases the RBA toward easing, the overall tone was one that would be best characterised as cautiously optimistic.
That means the release of the second quarter CPI on July 27 “clearly need to miss the RBA’s May SoMP 1.5%/yr underlying CPI forecast for the Bank to cut,” Prashant Newnaha, rates strategist at TD Securities in Singapore, wrote in a note to clients this afternoon.
TD thinks that inflation will disappoint and so is one of the many economist still betting on an August rate cut.
But traders are focused on the more positive tone of the minutes.
That, and the re-emergence of trader risk appetite as the polls suggest the chances of Britain voting to leave the EU have diminished, has seen the bid tone come back into the Australian dollar and its commodity currency cousins the Kiwi and CAD.
A short time ago the Aussie traded at $0.7503 – the equal highest level it’s traded in the past six weeks.