RBA: Market weighs live March hike risk – TD Securities

TD Securities’ Senior Strategist Prashant Newnaha highlights that recent comments from RBA Deputy Governor Hauser sound hawkish and reinforce Governor Bullock’s message that the March Board meeting is live. The bank currently expects a rate hike in May but concedes there is a credible case for an earlier move next week.

Hauser comments sharpen March hike odds

"RBA Deputy Governor Hauser's podcast with Michelle Grattan was released today ahead of the 'blackout period', which should commence from tomorrow 2pm AEDT through to next week's Board meeting. We interpreted the Deputy Governor's comments as leaning hawkish, which now pins next week's meeting as an even bet, consistent with Governor Bullock's comment last week that the March meeting is live."

"Asked whether there could be a rate change, he acknowledged: "There’s clearly information on the upside for inflation over that period""

He noted in particular: "We’ve had some data that seem to have confirmed even more decisively than we had before, that our economy currently has limited spare capacity", "Unemployment came in a bit below expectations. Job adverts and other measures of demand for labour were a little higher", "GDP growth came in at 2.6 per cent on the year earlier, which is great news, of course, but it’s rather bigger than our 2 per cent estimate of the capacity of the sustainable rate of growth in the economy".

"Even after Governor Bullock's comments last week that the March Board meeting is 'live', the market did not price it as a 50-50 probability."

"Today's podcast helped put the odds firmly in line with an each-way bet. While the Deputy Governor expressed his views only, today's release does prep the market that a rate hike is a real possibility at next week's meeting."

"Our current call is for the RBA to hike at its May meeting, but we acknowledge there is a credible case to hike next week."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)