AUD: CBA maintains base case December RBA 25bp rate cut – see firmer disinflationary pulse

A detailed note from Commonwealth Bank of Australia on what they expect from the RBA.

In summary:

• Our base case sees the RBA commence normalising the cash rate by the end of 2024 (we have pencilled in December for the first 25bp interest rate cut)
• A firmer disinflationary pulse than the RBA anticipates is a necessary condition for the Board to ease policy this calendar year.
• The already released September quarter consumer prices data in a raft of surveys gives us greater confidence that the much desired disinflationary process has recently gathered momentum.
• But it will be up to the Q3 24 CPI, due to be released on 30 October, to confirm that our assessment of the current pace of inflation is the correct one.
• The RBA Board will be more willing to commence normalising the cash rate if inflation proves less persistent than previously assumed.

CBA take a detailed look at 7 inflation indicators. Like I said, its detailed, but in very, very brief:

• Melbourne Institute Inflation Gauge has dropped sharply
• NAB final prices measure eased further in September
• Output prices in the S&P/Judo PMI back to their pre – pandemic run rate in September
• Advertised rental growth has dropped sharply
• ABS monthly CPI indicator posted a welcome drop in August
• CBA internal wages model has turned down
• Consumer inflation expectations are also trending lower

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AUD update, it opened lower after the info from China over the weekend was disappointing, and it hasn’t really bounced yet:

• China offers few details on stimulus in Saturday’s press conference
• Four of China’s biggest state-owned banks confirm mortgage rate cuts, beginning October 25
• China September CPI rate fell below August and below expectations. PPI slumped further.

This article was written by Eamonn Sheridan at www.forexlive.com.