RBA Governor Glenn Stevens ready to pull the trigger.
Good morning.
For several months Glenn Stevens and the RBA board has been warning that the emergency settings of interest rates need to return to a more neutral setting.
Recent domestic economic data has been much better than forecast and at Governor Steven's appearance at the Senate Economics Committee last week, he appeared to be getting a little impatient with having to repeat himself.
In his opening address to the Senate Stevens said:
"The key factors have been articulated before, but it may help to frame our discussion here today if I recount them."
____________________________________________________________________________________
Economic data continues to outperform with yesterday's ANZ job ads adding to the Australian recovery outlook.
Yesterday was a very unusual day in the markets. It was a public holiday in NSW and debt and equity markets were expected to be subdued.
Not so. Debt markets were sharply lower following headline stories in the AFR and SMH. Both Mitchell (see attachment) and Gittens raised the prospects of October rate hikes, with MBL Rory Robertson joining the chorus during the day.
Futures prices moved sharply lower, increasing bank bill yields to 3.95% and three year bond yields to 4.95% in anticipation of early moves.
____________________________________________________________________________________
So today the RBA will commence the rate hike cycle, or at the very least announce the start will be in November. Either way, starting the rate hike cycle early will provide a clear guide to the pace and extent of rate rises.
The RBA will cushion the early rises with a few successive moves of 25 points. Back to back hikes make sense and a cash rate of 4% can be achieved by early in 2010. The pace and frequency from then will be made by on-going data, but some pause is expected after 4%.
Eventually the RBA will want to get the cash rate to around 5% and ideally well before any emerging signs of inflation.
That is next year's issue for the RBA.
With kind regards,
|
If you wish to have any of the above points explained, wish to make a trade or
have any further enquiries please contact John Craig by phone on
(02) 8243 3526 or by email:
jcraig@bellcommodities.com.au |
|
