RBA leaves rates unchanged, August meeting still ‘live’

After omitting an explicit easing bias in the June post-meeting statement, the RBA on Tuesday left the cash rate unchanged at 1.75 percent and introduced a soft easing bias in its statement that followed. The reintroduction of a soft easing bias in media release suggests the August meeting is ‘live’.

While in its June statement, the RBA had pointed out that unchanged rates were in line with sustainable growth and a return of inflation to target, it now sounds more open-minded about further easing measures.

Changes to the post-meeting statement were minimal. The key change was the comment on Brexit, with the Bank noting that “financial markets have been volatile recently as investors have re-priced assets after the UK referendum.” The RBA currently expects the underlying inflation to stay below the two to three percent band for the next twelve months, notwithstanding signs that very weak wage growth may finally be stabilising.

"In our view, the reintroduction of an explicit easing bias, albeit a soft one, opens the door to an August rate cut. We expect that weak inflation and rising uncertainty will trump the strong Q1 GDP data," said ANZ in a report to clients.