Wednesday, 17th April, 2019

Last week, global central banks stuck with their cautious tones largely as expected. Firstly, the ECB continued to note that it will keep interest rates at their present levels at least through the end of 2019, and “in any case for as long as necessary.” Meanwhile, the minutes from the US Federal Reserve’s March meeting reiterated that further rate hikes this year are off the table. Locally, the Reserve Bank’s next move is more delicately balanced. Indeed, this week’s Q1 inflation data (due Wednesday) will help bring some clarity at least to the near-term OCR outlook. We expect inflation to lift 0.2% over the quarter, and an outturn similar or lower is likely to see interest rate markets price in an increased chance of a May OCR cut. Recall, at this juncture, we expect an OCR cut in May, followed by second cut in August.