- RBA paused, keeping the cash rate at 4.10% for the month of July.
- The RBA faces difficult decisions ahead, failure to return inflation back to target means higher rates for longer. However, how much pain is enough to ensure targeted progress?
- The narrative needs to stay in control of the RBA to avoid consumer sentiment and demand running rampant.
The Australian Economy
- An easing in monthly inflation sees some reprieve potentially on the horizon as we approach quarterly CPI.
- Consumer sentiment was buoyed by falling inflation but tempered by ongoing RBA tightening bias.
- The dwindling of ES balances and a negative funding gap across the banking system continues to keep funds tight.
- This paired with EOFY liquidity target and balance sheet strengthening has seen a strong demand for funds.
- Reference rates continue to climb slowly, with thin trading in interest rate markets making for dramatic price movements.
- Both demand for funds and increases in reference rates has favoured investors seize the opportunity lock in longer duration placements.
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