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I am not holding my breath for anything illuminating to come out of the RBA\u2019s accompanying rate statement and press conference. I believe we will see the Board underscore a cautious tone, echoing the \u2018data dependent\u2019 approach. The central bank will likely shine the spotlight on the disinflation progress but stop short of providing anything concrete to signal further cuts.<\/p>\n
The RBA will also release their detailed quarterly updated forecasts on growth (GDP [Gross Domestic Product]), unemployment, inflation, and the Cash Rate. Traders will look at these metrics closely for any revisions. I expect slightly lower revisions to GDP and inflation, but I do not see much change in forecasts for the Cash Rate.<\/p>\n
In Q2 24, headline Australian inflation came in lower than expected, decelerating to 2.4% (from 2.8% in Q3 24) and marking the lowest quarterly reading since early 2021. This not only places headline inflation within the lower boundary of the RBA\u2019s inflation target band of 2-3%, but the trimmed mean inflation rate \u2013 the RBA\u2019s preferred measure of underlying inflation \u2013 also exhibited signs of softness, cooling to within touching distance of the RBA\u2019s upper target band (3.0%) at 3.2% in Q4 24 (year-on-year [YY]) from 3.5% in Q3 24.<\/p>\n
GDP cooled to 0.8% in Q3 24 (YY), down from 1.0% in Q2 24 and marked the slowest pace of economic growth since late 2020. Quarterly (Q3 24), GDP grew by 0.3%, following a slight increase of 0.2% in the previous quarter (Q2 24).<\/p>\n
However, while inflation is trending in the right direction and growth remains subdued \u2013 providing some legroom for the RBA to cut the Cash Rate this week \u2013 the central bank\u2019s easing cycle will likely be slow and steady this year. Coupled with underlying inflation trending just north of the RBA\u2019s inflation target, the central bank still faces a reasonably solid jobs market. Employment increased by 56,300, comfortably surpassing the market\u2019s median estimate of 15,000 and was above November\u2019s revised reading of 28,200, and wage growth remains steady.<\/p>\n