Interest rates: Robust jobs data dashes hopes for early RBA policy pivot

Already a subscriber?Shares can sustain their record-breaking form without the benefit of monetary easing, investors say, after a modest deterioration in the jobs market reinforced expectations the Reserve Bank will be in no rush to cut interest rates.

The unemployment rate ticked up to 3.8 per cent in March, from 3.7 per cent, but that was below forecasts for a deterioration to 3.9 per cent. Employment shed 6600, following February’sand against an expected rise of 10,000. The figures are notoriously volatile due to seasonal adjustments. “There’s no impetus for the RBA to cut rates as inflation is outside of the 2 per cent to 3 per cent target band. The RBA will be very comfortable to sit on hold.” Barrenjoey forecasts easing in November.UniSuper’s Mr Pearce said the equity market did not need rate cuts to sustain the rally that enabled it to reset its record high this year. “Four point three five per cent? Fine,” he said, referring to the RBA cash rate.

“This idea that the Reserve Bank can even contemplate rate cuts is completely off the table,” he said, highlighting signs that activity was picking up pace, similar to the US. “The problem for the Reserve Bank is that they cannot have an economic recovery before inflation is back to target because a stronger economy now means higher inflation in six to 12 months.”The Australian dollar held at US64.47¢, within sight of a five-month low of US63.

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