Easing cycle begins, tentatively
Not feeling an urgent need here to add to the vast quantity of news flows out there already today!
But, just to note in brief...
The Reserve Bank of Australia cut interest rates by 25 basis points to a cash rate target of 4.10 per cent.
As predicted, it was a "hawkish" cut...effectively a warning shot that if things start to heat up again then this may prove to be a very short-lived easing cycle.
As such there was very little movement in the currency, with the Aussie dollar holding at 63½ US cents (well above where we started the year at a shade under 62 US cents).
The Reserve Bank's forecasts are hopeful of seeing the unemployment rate peak for this cycle at just 4.2 per cent, effectively holding on to almost all of the large employment gains experienced across recent years.
It should go without saying that this would an awesome outcome if it can be achieved.
Source: RBA
The trimmed mean inflation rate is expected to hold in the target band at around 2.7 per cent, though the cynic in me says that an election year could well see a renewed tidal wave of government subsidies that aim to put downwards pressure on many of the key inflationary pressure points for households.
This assumes we don't get an equivalent bout of stimulatory election spending promises in tandem, of course!
Source: RBA
All four of the major banks were evidently not keen to become political footballs in the lead-up to the Federal election, and thus immediately passed on the 25 basis points cut in interest rates to mortgage borrowers in full with no fanfare.
Looking ahead, market pricing is likely to be a bit sketchy at this stage, but OIS markets are looking for a couple of further interest rate cuts by around May 2025 and December 2025 respectively, though there's potentially a lot of water to flow under the bridge between now and then.
Source: Bloomberg
It wouldn't be at all surprising if the follow-up press conference is uber-hawkish in its rhetoric, and gives such dovish market pricing a bit of a kick up the backside.
If history is any guide to market cycles - and given the shortage of supply - the housing market will first lift in Sydney, followed by Melbourne, and then ultimately in certain other capital cities and regional markets around the country.
SQM Research effectively announced as such this afternoon, predicting nominal housing price increases in all eight capital cities, ranging from a lot for Perth to a little for Hobart.
Source: SQM Research
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