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Hedge Clippings | 11 July 2025 According to the AFR, 32 out of the 36 economists that they surveyed prior to this week's RBA board meeting got it wrong. That's not very encouraging if you're making decisions based on their advice, and certainly not good for your bonus if you were in a bank's dealing room trading or relying on the outcome. We suspect that privately there were red faces among the 32 wrong-footed economists, and some angry ones on their banks' respective dealing desks. At the risk of saying "we told you so", they should have listened to our video in last week's Hedge Clippings, when we asked Seed Funds Management's Nick Chaplin, and Renny Ellis from Arculus Funds Management, their opinion, and most importantly, what they would be doing were they in Michele Bullock's chair? Their unanimous answer was "sit tight", and backing it up with sound logic and reasoning. We asked them again after the RBA's board had voted 6-3 in favour of holding the line, and they're still not fully convinced there's a rate cut required in September, even though they believe there's a better chance next time around if there's more clarity on the numbers - particularly the June quarter's CPI due on 30th of July. You can see both interviews below. So how come so many experts - and it seems journalists - got it wrong? The journalists can be forgiven on two counts: firstly, they were led astray by the experts, and secondly, judging by some of the questions directed at Michele Bullock after the meeting, they were disappointed that their own mortgage repayments weren't about to be reduced. Bullock and her board received some unjustified criticism (implied or otherwise) at the RBA's press conference, as she patiently explained the board's thinking, when she could have been much more direct in her responses. If her critics had taken the time to analyse the "RBA speak"in the board's post-meeting statements over the past six to 12 months, it would have been pretty clear. Let's take one of the RBA's big concerns - "Uncertainty"- a word used over 50 times in their statements over the past 12 months, and a headline in bold, with an explanation to itself in every monetary policy statement for at least the past year. That leads one to conclude - if you hadn't already guessed - that central bankers don't like uncertainty. Next, take Inflation. The RBA wraps up every statement with words to the effect "inflation is (or remains) the priority", sometimes also adding "full employment"into the mix. Again, how come everyone (or at least the 32 out of 36 economists in the AFR survey) focused on the new monthly inflation number for June of 2.1%? Ignoring the fact that the monthly data uses an incomplete data set, and the more reliable quarterly number for March was 2.4%, and also ignoring the fact that the RBA prefers the quarterly trimmed mean number, which came in at 2.9%. It seems that the RBA is comfortable with the current employment outlook, at least as far as their dual mandate of balancing inflation and full employment is concerned. But full employment in itself is potentially inflationary, and central bankers, by their nature, are not risk takers. With only three weeks to wait for more reliable June quarter inflation numbers, and five weeks before their next board meeting, they judged they could afford to wait. Will things be less uncertain by then? Possibly - in fact, with the exception of the CPI number, probably not. There is a complete lack of certainty over the eventual tariff numbers that will come out of the White House, and even in the unlikely event they are set in stone, a lag as the world - including the FED and Jerome Powell - waits to see how much damage they will or won't wreak on both the USA's and their trading partners' economies. Although we don't think the Donald thinks of other countries, even allies, as partners. More like adversaries who've been "ripping off"America for decades. News | Insights Expert Analysis of the RBA's rate decision | FundMonitors.com Expert analysis on what the RBA will do next Tuesday, July 8 | FundMonitors.com News & Views: Oil spikes and geopolitics - How does Global Listed Infrastructure fare? | 4D Infrastructure Market Update | Australian Secure Capital Fund June 2025 Performance News Bennelong Australian Equities Fund Glenmore Australian Equities Fund 4D Global Infrastructure Fund (Unhedged) Bennelong Concentrated Australian Equities Fund |
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