Technical Analysis

TD on RBA rate hike statement: “no suggestion the Bank was considering a pause just yet”

We had the Reserve Bank of Australia rate hike yesterday, accompanied by a leaning hawkish statement. Summary in the wrap:

ForexLive Asia-Pacific FX news wrap: RBA hikes cash rate by 25bp as expected

More detail:

TD on the statement:

  • statement offered no suggestion the Bank was considering a pause just yet. It reiterated its forward guidance as it has since the October meeting that “The Board expects to increase interest rates further over the period ahead
  • “The RBA’s decision to retain this segment of its forward guidance was the right course of action. Pre-empting the Q4’22 inflation print and signalling a potential pause in today’s Statement would not have stacked up as prudent ‘risk management’ in our view
  • Bank removed reference to its central CPI forecast for 2023. It also removed reference to its central unemployment rate forecast over coming months. In contrast, it reiterated its GDP forecasts for 2023 and 2024 … The way we are reading these omissions is that a clear source of uncertainty for the RBA comes from the strong labour market and the upside risk to inflation it poses to its 2023 forecasts. For sometime the RBA has telegraphed that Australian wages growth …. remains lower than in many other advanced economies. However this was absent from today’s Statement and suggests the RBA views the risks to the upside.

We’ve just had data from Oz:

There is not really anything in the GDP data to suggest a pause. Indeed, if you check out that post you’ll see the still high level of the household saving rate. This indicates consumers still have an accumulation of financial buffers that will continue to support domestic demand well into 2023. No need for the RBA to pause just yet. The next Reserve Bank of Australia meeting is February 7.

AUD not doing a lot:

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