RBA: Bullock Reiterates That RBA Not On Pre-determined Rate Path
RBA Governor Bullock is appearing before the Economics Committee at the Australian Parliament. She made earlier remarks, see this link.
- In terms of monetary policy, her speech made the following remarks:
"Looking ahead, the Board is committed to being guided by the incoming data and our evolving assessment of the risks. While the strong employment growth is good news for jobseekers, we are alert to the possibility that it is signalling a bit more strength in the economy, which could delay or derail the disinflation process. We have not pre-committed to any particular course of action on interest rates. But in the forecasts published this week, the central projection suggests that if monetary policy is eased too quickly or by too much, disinflation could stall and inflation would settle above the midpoint of the target range. So the Board remains cautious about prospects for further policy easing." - This reiterates the bias from Tuesday's statement and Bullock's press conference.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE BONDS: Cheaper, US Tsys Bull-Flatten But Yields Above Local Close Levels
ACGBs (YM -4.0 & XM -3.0) are cheaper. Meanwhile, the US Treasury curve bull-flattened following Monday’s holiday, as market focus remained on Trump administration policies post-inauguration. US yields ended 1-5bps lower but were above levels seen at the Australian market close.
- Data was limited: the January Philly Fed non-manufacturing survey was soft, and Canadian CPI came in below expectations.
- Cash ACGBs are 3bps cheaper with the AU-US 10-year yield differential at -14bps.
- Swap rates are 2-3bps higher, with EFPs slightly tighter.
- The bills strip has bear-steepened, with pricing flat to -3.
- RBA-dated OIS pricing is flat to 3bps firmer across meetings today. A 25bp rate cut is more than fully priced for April (108%), with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
- The local calendar is light this week after key December labour market data last Thursday. The highlights are the Westpac Leading Index today and S&P Global PMIs (P) on Friday. The focus is now on Q4 CPI data released on Wednesday, January 29.
- The AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond today and A$700mn of the 1.50% 21 June 2031 bond on Friday.
AUSSIE 3-YEAR TECHS: (H5) Corrective Bounce
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.190/360 High Dec 31 / High Dec 11
- PRICE: 96.110 @ 15:52 GMT Jan 20
- SUP 1: 95.830 - 1.000 proj of the Dec 11 - 20 - 31 price swing
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
A bear cycle in Aussie 3-yr futures remains intact and short-term gains are considered corrective. The recent move down reinforces the bear theme and the contract has traded through the December low. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low. On the upside, a clear reversal would instead signal scope for an extension towards 96.190, the Dec 31 high, and 96.360, the Dec 11 high.
NEW ZEALAND: Non-Tradeables Lowest Since 2021, Feb 50bp Rate Cut Likely
Q4 NZ CPI was close to Bloomberg consensus expectations at 0.5% q/q and 2.2% y/y after 0.6% & 2.2% in Q3, above the RBNZ’s November forecast of 0.4% & 2.1%. The slightly higher outcome was driven by international airfares with the volatile component accounting for almost a quarter of the quarterly increase. With the data printing close to the RBNZ’s projections and non-tradeables easing, another 50bp cut on February 19 seems likely given the weakness of the economy.
- Headline inflation was impacted by a number of volatile components, such as airfares & cars, and so the underlying measures are likely to be the focus of the RBNZ with its own sector factor model estimates due at 1500 NZDT (1300 AEDT) today.
- Domestically-driven non-tradeables were slightly lower than expected rising 0.7% q/q and 4.5% y/y, the lowest quarterly rate since Q3 2020, and below the RBNZ’s projections of 0.8% & 4.7%. It rose 1.3% q/q and 4.9% y/y in Q3. Rents continue to grow strongly rising 0.8% q/q making a 15% contribution to Q4 CPI. Services prices rose 1.4% q/q and picked up to 4.8% y/y from 4.5%, still elevated.
- Stats NZ notes that excluding petrol prices, which fell 9.2% y/y, headline inflation would have been higher at 2.7% y/y.
- Vegetable prices were down 14.6% y/y. Thus the CPI ex food rose 0.8% q/q and 2.4% y/y.
- Tradeables were higher at +0.3% q/q but still down 1.1% y/y after -0.2% & -1.6%. This quarterly rise was the first since Q3 2023 suggesting that the disinflationary impact from goods prices is over. It was also higher than the RBNZ projected (-0.2% & -1.5%). Goods prices were flat though to be up 0.6% y/y.
NZ CPI y/y%
