RBA Minutes: Rate cut decision driven by (low) inflation - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that the RBA Minutes make it clear both that the decision to cut rates at the start of the month was a close one and that it was driven by (low) inflation.

Key Quotes

“A month ago the consensus market view was that a further rate cut was unlikely, since when low Q1 CPI saw the market expect a cut, the RBA deliver one, and market pricing of a further cut this year climb to close to 80%. Today, the market consensus, having been led this merry dance through the Australian Outback by the RBAs pied pipers, is cutting short AUD positions.

We remain short NZD/USD as the Chinese economy continues to grow too slowly for (Asian) comfort. The story of recent FX moves is one of re-convergence, as the strongest currencies on a 10-year view fall, and the weakest bounce. In real terms, AUD is trading pretty much where it was a decade ago after giving up 30% in value since the start of 2012.”