Argonaut Algorithm: Copper’s a long-term theme for fundie David Franklyn

Members commenced their discussion of financial conditions by observing that financial market pricing continued to imply a relatively benign outlook for global growth and inflation. Corporate bond spreads had fallen back to levels close to those prevailing immediately prior to the US Administration’s tariff announcements in early April. Equity prices were at or near record highs and measures of equity risk premia were low. The improvement in market conditions in preceding weeks appeared to reflect an expectation that the most extreme outcomes for US tariffs were likely to be avoided. However, the final scope of tariffs and policy responses in other countries remained unknown; there were persistent geopolitical tensions, including conflict in the Middle East and Ukraine; and increasing concerns about long-run fiscal sustainability in a number of major advanced economies. Members discussed whether current financial market pricing reflected a degree of complacency on the part of market participants about the impact of these factors on the outlook for the global economy or suggested that earlier pessimism might have been overstated. Central bank policy rate expectations had generally been little changed since the previous meeting. In the United States, financial market participants expected the US policy rate to be reduced only slightly over the remainder of 2025, consistent with relatively high near-term market-implied measures of inflation expectations, and then by more in 2026. Likewise, policy interest rates in most other major advanced economies were expected to be reduced by only a small amount over coming months, following significant reductions over the prior year. The Bank of Japan was expected to continue raising its policy rate gradually. Longer term sovereign bond yields had declined a little across most advanced economies since the previous meeting but remained higher than around a year earlier. There had been minimal immediate reaction in yields to the passage in the US Congress of the Administration’s One Big Beautiful Bill Act of 2025. Nonetheless, the prospect of the passage of the legislation had contributed to growing concerns over sizeable fiscal deficits in future. Members noted that yields in Australia had declined by more than in the United States, including in response to the market’s interpretation of how incoming domestic data might influence monetary policy. RESERVE BANK OF AUSTRALIA MINUTES: BOARD AGREED FURTHER RATE CUTS WARRANTED OVER TIME, FOCUS WAS ON TIMING AND EXTENT OF EASING BOARD CONSIDERED WHETHER TO LEAVE RATES AT 3.85% OR TO CUT BY 25BPS MAJORITY AGREED PRUDENT TO AWAIT CONFIRMATION ON INFLATION SLOWDOWN BEFORE…