Westpac economists predict that the Reserve Bank of Australia will not change the cash rate during its meeting on 1 April, calling the event a “dead rubber” regarding monetary policy. They believe that a rate cut in May remains likely, but consecutive cuts in February and April are improbable given the RBA’s previous statements.
Recent economic data aligns with the bank’s forecasts, with underlying inflation staying at or below expectations. The government’s six-month extension of electricity rebates may delay headline CPI recovery, but Westpac anticipates the RBA will focus on core inflation metrics.
Impact Of Recent Fiscal Measures
Other recent fiscal measures are viewed as too limited to influence the RBA’s stance significantly, despite affecting short-term market pricing. In May, inflation data will be critical, with expectations hinging on whether trimmed mean inflation is at 2.7% or 2.5% for the March quarter.
RBA Governor Bullock is scheduled to hold a news conference shortly after the meeting.
Westpac’s assessment implies that the Reserve Bank is unlikely to alter the cash rate in its upcoming meeting, largely due to the lack of new economic developments justifying a shift in direction. A “dead rubber” in this context suggests a decision with minimal consequence, as current inflation trends and broader financial conditions have already set expectations for the months ahead. Their view that a move in May is still on the table aligns with prior guidance from policymakers, although the idea of back-to-back reductions earlier in the year appears inconsistent with previous signals.
Data supporting this prediction continues to surface. The latest figures indicate that underlying inflation is not exceeding forecasts. More transient influences, such as the extension of electricity rebates, could affect headline inflation figures temporarily, but Westpac argues that the Reserve Bank’s emphasis remains on core inflation. This distinction is relevant because short-term movements in consumer prices, driven by government intervention, do not necessarily reflect underlying demand dynamics.
Significance Of Upcoming Inflation Data
Meanwhile, fiscal decisions in recent weeks seem too contained in scope to prompt a shift in monetary policy. While they might cause brief market reactions, they fall short of the scale required to trigger a rethink from the Reserve Bank. What carries more weight is the next set of inflation readings, due ahead of the May meeting. The difference between a trimmed mean inflation print of 2.7% versus 2.5% for the March quarter is not just a technical matter. Every decimal point will shape the conversation, determining whether officials see enough progress toward their inflation target to justify making a move sooner rather than later.
Governor Bullock’s upcoming press conference will provide additional insight into the Reserve Bank’s confidence in its current stance and the likelihood of adjustments in the near term.
