Yesterday the Australian’s left their official cash rate unchanged at 7.25%, 100 basis points lower than our cash rate. The rate has been on hold since March, but the overall feeling is that the bias is still towards further tightening – especially with the inflation rate at 4.2%.
However, the evolution of the statement between March, then April, and finally in May has been interesting. Beyond all the fluff involved in each statement one underlying factor has been key for the medium term outlook in the RBA’s mind – the strength of domestic demand. The language associated with with domestic demand has changed significantly over the months, in March: Read more