Besides their mandate on price stability, one of the RBA's "side quests" is to better communication so as to make smoother the transmission of monetary policy. And one can argue that given what markets were pricing in before the decision, that did not occur. There's definitely some work to be done there and Bullock has to try and defend that later.
I mean, when you talk about having potentially cutting by 50 bps in May and tried to make it a point as seen here, you're asking for some reaction out of markets. Bullock did note however that "it was not the strongest argument in the room" but still. There was no further clarity on that in the lead up to this meeting, so that pretty much explains how markets got carried away with the train of thought.
Coming into today, traders were seeing ~74 bps of rate cuts by year-end. And with four more meetings to go, that is still plausible. However, a lot will depend on what Bullock communicates later ahead of the next policy decision in August.
Does "a little more information" mean the next quarterly CPI report on 30 July? Based on the current context, I would believe so.
However, we'll have to wait for Bullock later to come out to confirm that and provide more clarity for markets ahead of the August meeting surely.
This article was written by Justin Low at www.forexlive.com. Read More Details
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