RBA Watchers Sound Hawkish Alarms After June Hike

The well-known RBA watchers at the major press outlets have come out flagging hawkish policy risks after the Bank lifted rates by 25bp on Tuesday, while it maintained pre-existing guidance re: the potential need for further tightening in the process.

• Terry McCrann of the Herald Sun notes “The Reserve Bank really should have hiked by 0.5 per cent and linked it directly to last Friday’s national wage decision… We might get a pause in July. But the inflation data for the June quarter, released at the end of July, ahead of the August RBA meeting, will be utterly determinative.”
• The AFR’s Kehoe notes “The Reserve Bank of Australia’s 12th interest rate rise may not be the last, as governor Philip Lowe loses patience in response to the emerging “upside risks” to inflation and frets that it will embed higher wage claims.”
• The WSJ’s Glynn notes “A fundamental breakdown between the aims of wage policy and monetary policy in Australia is now threatening to drive interest rates up more than most economists are forecasting, and there seems to be little government will to correct the situation.”
• RBA-dated OIS price in another ~21bp of tightening when it comes to terminal rate levels (seen at the end of the Bank’s November meeting), a touch shy of the post meeting peak.
• Our full post-meeting review, including a summary of sell-side thoughts, will be published on Wednesday.