Daily Flows & Insights – RBA’s Revised Neutral Cash Rate 

Daily Flows

  • Yesterday term deposit flows were directed to the shorter end of the curve, with market participants picking up yields upwards of 4.60% for 3 months.
  • 5.10% continues to be offered for 1 year term deposits and continues to attract funding from Middle Market Investors.
  • With demand for funds persisting, the NCD market level for 3 month continues to hold at a +45 level.

RBA’s Revised Neutral Cash Rate

  • The local data releases for the week get under way today with the monthly consumer sentiment report due out.
  • It will be interesting to see what impact the latest move from the RBA and the government’s latest budget have had on consumer confidence.
  • This is important as where consumption goes, so does monetary policy.
  • Also out today are the minutes from the RBA’s May board meeting
  • The details will be sifted through for any clues to the outlook.
  • However, the recent Freedom of Information request received by the RBA showed that their previous assumption for the neutral rate was much lower than where it now stands.
  • It was suggested that the neutral rate for the cash rate, where it is neither restrictive of stimulatory, was almost 1% lower than the latest assumption.
  • The latest assumption puts it roughly in line with where the cash rate currently is which could have ramifications for the outlook further down the track.
Share this entry
Curve Team
David Flanagan