Wednesday, 22 November 2017

RBA very unlikely to move today

7th February 2017

RBA very unlikely to move today

The primary reason that the RBA will be less inclined to adjust the Cash Rate today is year-ended core Inflation (excluding volatile items) data for December 2016 amounted to 1.3%. This is well below the 2-3% RBA Inflation Targetover the Long Run. Outside of this, money markets have been consistently stable for months now and are providing yields well about the Cash Rate of 1.5%. This money market data suggests the RBA could actually raise the Cash Rate to bring more alignment to the CGS market. However, the bond markets only stabilised last year in November upon the Trump election result, as the markets moved to take more risk by moving moneys out of bonds and into equities. Click here to view current CGS yield data. Though it is uncertain how stable this trend will be as we move further into the Trump Administration, the buzz word in financial markets at the moment being ‘uncertainty’. Making it unwise for the RBA to increase the Cash Rate today.

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