RBA keeps rates at 4.35%, raises CPI forecast; BoE next in line

RBA leaves rates unchanged

As expected, the Reserve Bank of Australia (RBA) left its cash rate unchanged at 4.35%. In its statement, the RBA warned the cash rate is assumed to remain around its current level until mid-2025, around nine months longer than assumed in February, and sharply raised its inflation outlook. It sees CPI at 3.8% until December, and expects it to decline to 3.2% in June 2025 and 2.8% in December 2025.

BoE

On Thursday, the Bank of England (BoE) is expected to maintain the interest rate at 5.25% for the sixth consecutive time. March saw a notable dovish shift from the BoE, hinting at a potential future cut. It was the first time in the current cycle no members of the Monetary Policy Committee voted for a hike.

BRC

UK consumers kept a lid on their spending in April. The British Retail Consortium (BRC) reported a sharp fall in retail sales last month. This was to be expected as this year the run up to the Easter holiday happened earlier in March. Retail sales fell by 4% year-on-year (YoY), after a 3.5% rise in March. Putting March and April together, sales only increased by 0.2% compared to the same two months in 2023.

Also, Halifax house price index rose by 0.1% in April month-on-month (MoM), +1.1% YoY.

Earnings

BP net income missed expectations in the first quarter (Q1). Adjusted net income came in at $2.72 billion, compared to estimates of $2.99Bln. Analysts expected BP profits to slow due to a lower oil price, weaker refining margins and concerns over its energy transition strategy.

The group continues to expect 2024 capital expenditure of around $16Bln, and announced a $1.75Bln share buyback programme.

UBS this morning posted a profit before tax of $2.38Bln for the first quarter, more than double its own estimates. This was the first quarterly profit since taking over fallen rival Credit Suisse. Revenue came in at $12.74Bln, beating analysts’ expectations.

Walt Disney is due to report its quarterly earnings on Tuesday. The street anticipates earnings of $1.10 per share for the second quarter, an 18% increase on the same quarter a year ago. Revenue should reach $22.12Bln, 1.4% YoY.

Also expected today is Kenvue, Johnson & Johnson's consumer health spinoff, and Occidental Petroleum.

Traders will be attentive to Boeing’s shares on Tuesday. The Federal Aviation Administration (FAA) opened a new inquiry after the company told air safety regulators that it might not have properly inspected its 787 Dreamliner planes. The FAA said it would look into whether staff had falsified records - and is reinspecting all 787 jets still on the manufacturing line.