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Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global Advisors.
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global Advisors.
Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said headline employment jumped more than four times expectations in April, potentially due to flooding impacts on data collection in Queensland.
"Headline employment jumped over four times our expectation in April, perhaps due to a 'very low sample of responding households' in some parts of Queensland due to recent floods," he said.
The stronger-than-expected jobs data has created uncertainty around the pace of monetary policy easing.
"The data nonetheless puts our call for four more rate cuts this year at risk," Bhimavarapu said.
However, he suggested upcoming gross domestic product figures could provide clarity on the economic outlook and support the case for rate reductions.
"We believe the GDP data to be released on 4 June will reclarify the necessity for lower rates, especially as last week's data showed that retail volumes had stalled," he said.
Bhimavarapu maintained expectations for a 25 basis point rate cut at the Reserve Bank's next meeting.
"We still expect the RBA to cut the cash rate by 25 bps next week to 3.85 per cent and maintain the view that the cash rate may end 2025 at 3.10 per cent," he said.
The economist's comments highlight the challenge facing the RBA in balancing labour market strength against broader economic softening.
Recent retail data showed consumer spending volumes have stalled, suggesting underlying economic weakness despite the robust employment figures.
State Street manages $4.7 trillion in assets under management and provides custody and administration services for $46.8 trillion in assets globally.
The labour force data comes as the central bank weighs inflation progress against economic growth concerns in determining future monetary policy settings.
Financial markets are closely watching employment trends and consumer spending patterns as key indicators for the pace of interest rate adjustments ahead.
The June GDP release will provide crucial insight into the broader economic momentum and may influence the RBA's approach to further rate cuts this year.
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