Today’s decision by the Reserve Bank of Australia (RBA) board to hold the cash rate at 4.35 per cent is unsurprising given the relatively steady nature of the most important data points that the bank is watching – those being inflation and labour force. Both measures are performing broadly as the RBA had forecast, and are not currently presenting it with any need to alter its thinking around the timing of the first cut to the cash rate.

The most significant change in developments this month was the US Federal Reserve’s somewhat surprising 50 basis point cut to the US cash rate. The major message that this cut sent is that the world’s biggest economy is perhaps slowing faster than first thought.

Revisions to US Labour Force data have been quite large and in the negative, meaning their labour force is weaker than what it appeared to be. The Australian labour force is not weakening nearly as fast, although of course this could change, and Australia has typically lagged the US by around six months in this monetary policy cycle.

If the data continues its current trajectory of slowly softening, then the RBA is unlikely to change course and the first cut is unlikely to be before the year is out. However, one soft unemployment report could change this thinking quite rapidly.