Daily Flows & Insights – Soft CPI Questions RBAs Outlooks

Daily Flows

  • Activity picked up yesterday off the back of ANZAC day.
  • Strong activity was seen on the 3-month time frame both in the NCD and term deposit space, with future rate increases from the RBA still up in the air.
  • A BBB ADI came out with  4.90% for 12 months, which investors took advantage of before the special was filled.
  • NCD margins also remained strong with one ADI offering +42 for 3 months.

Soft CPI questions RBAs outlooks

  • The Inflation rate came in slightly higher, the QoQ was 1.4% taking inflation down from 7.8% to 7% (6.9% expected) for the year.
  • Trimmed Mean was just below market expectations at 6.6%. Economists were forecasting a rate of  6.7% for the trimmed Mean YoY.
  • This data shifted market expectations, supporting the notion that the RBA will pause come May. Near term outlooks will be influenced by the RBAs forecasts released next week.
  • Looking forward, the market went from pricing in a 80% chance of a hike in August, to now rate cuts being considered end of 2023 calendar year.
  • Given that the RBAs main goal is to bring inflation down to target of 2-3% possible cuts remain unlikely pending a serious decline in the economy.
  • That being said it seems sentiment has shifted away from further tightening and an appropriate peak in monetary policy has been reached.
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Curve Team
Jack Pedersen