Lowe to Speak Shortly In Wake Of Hike That Wrongfooted Most

RBA Governor Lowe will speak in ~10 minutes time (21:20 AEST/12:20 BST).

• A quick reminder that the RBA delivered a surprise 25bp hike overnight (STIR markets only priced in a 10-15% chance of such a move pre-decision, while 9 of the 30 surveyed by BBG called for a 25bp hike), after pausing the hiking cycle back in April.
• The RBA maintained its tightening bias, noting that “some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.” The Bank’s latest batch of economic projections (formally released on Friday) will show that it still doesn’t see inflation falling to the upper end of its target range until “mid-2025.”
• In terms of underlying price dynamics, the Bank noted that “goods price inflation is clearly slowing… But services price inflation is still very high and broadly based and the experience overseas points to upside risks. Unit labour costs are also rising briskly, with productivity growth remaining subdued.” On the latter point the Bank remains alert to the risk of a wage-price spiral.
• STIR pricing pushed notably firmer post-decision, with terminal rate pricing of just over 3.95% now priced (come September/October). 10bp of easing is then priced by year-end.
• Click to listen to Lowe’s address.
• A short Q&A session will follow the initial address.