Trial now
MYR

Firmer Start

FOREX

AUD Leads G10 Pack, Volatility Subdued

US TSYS

Marginally Cheaper Early On

AUSSIE BONDS

YM Nudges Lower On Lack Of YCT Purchases

RBA

ACGB Purchase Offer Details

Sign up now for free access to this content.

Please enter your details below and select your areas of interest.

  • BanRep have plainly telegraphed in its July meeting and in recent interviews by several board members that they are ready to start hiking after an extended pause at 1.75%.
  • Earlier this month JPM changed their call for BanRep to begin the cycle with a 50bp hike, up from 25bp.
  • In their view, BanRep should and will hike 50bp on the combination of: a) sharply higher headline inflation above the target ceiling and the related upward drift in expectations; b) a current account deficit that they have revised up to 5.2% of GDP financed increasingly by portfolio flows; c) the related strong recovery in domestic-demand driven activity, which this week led them to revise 2021 growth up to 9%y/y; and d) latent financial stability risks amid large twin deficits and uncertainty over the 2022 election cycle.
  • However, public comments from Governor Villar and some of the dovish-leaning members of the board have suggested that this is a close call, given some directors' preference for a "gradual" tightening cycle, which we would interpret as 25bp per meeting.
  • In JPM's own scenario, starting the cycle with 50bp would represent more of a down-payment that could then allow BanRep to more comfortably ease into a more gradual pace thereafter.