RBA: 25bps cut coming tomorrow - TDS

Analysts at TD Securities are looking for a 25bps cut at tomorrow's RBA Board meeting but it is far from a done deal.

Key Quotes

“OIS is 42% priced for -25bp while the median is 1.25% (barely, at 14/26).”

“The decent Q1 core CPI miss & consecutive soft GDP prints suggest the RBA need not wait for a trend pickup in unemployment in order to cut tomorrow.”

“The market could see a dovish cut if more cuts lie ahead via significant downgrades to GDP/CPI forecasts (confirmed in Friday's SoMP). We look for -0.5pp for GDP & -0.3ppt for core CPI in 2019.”

“We expect an explicit easing bias if the RBA keeps rates on hold. OIS is then likely to price the next cut in August if the RBA focuses on weaker inflation.”