RBA likely to adopt rate cut at upcoming monetary policy meeting; Q1 GDP to be better than H2’18, says ANZ Research

The Reserve Bank of Australia (RBA) is expected to adopt a rate cut at its upcoming monetary policy meeting scheduled to be held next week, according to the latest report from ANZ Research.

The market will be shocked if the RBA doesn’t cut in June. Of more interest will be any clues it might provide about action beyond that. If the post-board meeting statement doesn’t provide any clues, attention will switch to the Governor’s speech that evening.

As for the data, the smallest current account deficit relative to GDP since the 1970s is expected. Retail sales look likely to be flat for the month of April, but we expect Q1 GDP to be better than the second half of last year and in line with what the RBA expects.

Given that the central scenario had inflation just inside the target band by the end of the forecast period, anything less favourable is unlikely to be an acceptable outcome for the RBA.

While the economy clearly lost momentum late last year, Q1 GDP is shaping up better and not everything is gloomy with regard to the outlook. For instance, Q1 capex pointed to growth in non-mining business investment in 2019-20, the report added.