The 2021 Anika speech was used to deliver three key messages to the market: 1/ The outlook for QE is further tapering. 2/ They need CPI near 2.5% before hiking. 3/ The market is wrong in pricing rate hikes in 2022 & 2023.
A recent bias to shorter bonds means that the risk (DV01) extracted by the RBA’s buybacks has declined. Combined with the tapering of the amount, this lowers risk extracted by about 30% per week.
The weekly 6-day jobs series is now available up to the week ending 29-August. It suggests little damage from Delta, clearing the path for an RBNZ hike on 6 Oct.
The RBA meets on 7 Sep. The data was strong in Q2, but the outlook is dimmer due to Delta. Bond market capacity makes faster QE unlikely. The most likely outcome is to pre-commit to buy at 4bn per week until at least Feb’22.
The RBA eschewed the signal-value of reversing the taper. My hunch is that they are worried about their market footprint and housing.
Another quarter of weak consumption and a decline of the ABS measure of job vacancies challenges the RBA’s conclusion that there’s no wealth effect form housing & their reliance on the lagging ABS measure of labour demand.
The RBA cut 25bps to 1% on 2 July, delivering a rare back-to-back easing. They didn’t, however, drop the sort of hint that would suggest another cut in August.
I don’t think the RBA will cut their cash rate in July. It would be odd and out of character for a Governor and a Board that has emphasised that importance of the Bank being ‘a source of stability and confidence’ over the past few years.
The Fed spiked the market with dovishness this morning. Taking the market implied rate for the end-19 fed funds rate
Terry McCrann (again) spiked the markets on Wednesday with an explosive article that warned that the RBA could cut 50bps
Vice Fed Chair Clarida gave a very interesting speech entitled Sustaining Maximum Employment and Price Stability on 30 May. It
Hidden inside the minutes to the Fed’s 30 April meeting is an alarming paragraph that suggests Fed staff have grave