NAB Morning Call It could have been bigger
May 20, 2025
In this engaging discussion, Sally Auld, NAB's market economist and strategist, delves into the implications of the RBA’s recent interest rate cut. She shares insights on the divided market expectations surrounding the decision and the potential for further reductions. The conversation also covers the contrasting paths of the RBA and the Fed, with ongoing inflation in the U.S. Moreover, Sally analyzes the significant movements in both Australian and Japanese bond yields, unraveling the complexities of global economic discrepancies and domestic inflation trends.
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Japanese Bond Market Nervousness
- Japanese long-term bond yields rose sharply after weak demand at a 20-year bond auction.
- Reduced Bank of Japan purchases and rising inflation contribute to increased market nervousness.
RBA's Dovish Shift Explained
- The RBA showed a dovish shift with a 25 basis point cut while considering 50 basis points.
- This reflects growing confidence that inflation is sustainably within target and consumption weakness is emerging.
RBA's Rate Cut Path Forward
- The RBA appears set to cut rates further throughout 2025 to bring the cash rate to neutral.
- Future rate cuts depend on domestic consumption and global trade developments.