RBA’s abstention is not the consensus

I think this is the basis that the Reserve Bank of Australia (RBA) is using for not following the rest of the world’s hawkish stance on interest rates.

“As the Board has stated previously, it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. While inflation has picked up, it is too early to conclude that it is sustainably within the target band.”

https://www.rba.gov.au/media-releases/2022/mr-22-02.html

While inflation has risen into its target range, the RBA’s articulation of it needing to sustainably remain in that band, aids my case that inflation will moderate into the year.

So much, that I think the U.S. Federal Reserve will CUT rates after it initially hikes twice.

Earlier this week, I wrote that I think the 5-7 Fed hikes predicted by some investment banks is ridiculous.

It increasingly seems the RBA is behind the curve (keeping cash rates at 0.10%) while the Australian 2 year note has risen (8-fold since October) to 0.90%, yet they seem to be the outlier bet in the rate hiking stakes, especially amongst the commodity exporting nations.

February 1, 2022

by Rob Zdravevski

rob@karriasset.com.au