RBA to remain on hold next Tuesday – Commerzbank

Australia added 47.5 thousand jobs last month. The labor market remains tight, although there are signs of slowing, notes Commerzbank currency strategist Volkmar Baur.

Inflationary dynamics to prevent RBA easing

“In the last 12 months, more than 30,000 new jobs were created per month, which is still well above the pre-pandemic rate (22,000 per month). This has led to wages rising too quickly to bring inflation back into the central bank’s target range. And this jobs report is unlikely to ease the RBA’s concerns.”

“There are early signs of a slowdown: full-time jobs have effectively been cut, and growth has only been in part-time positions. However, given the strong jobs numbers, this will not be enough to change the RBA’s mind next week.”

“Therefore, I expect the RBA to not cut rates next Tuesday and leave them at 4.35%. This is not ideal given the recent weakness of the economy. The economy would certainly welcome some relief. But it is still necessary given the inflationary dynamics.”