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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
RBA
Last week the RBA increased rates 25bp bringing the cash rate to 3.1%. This was the eighth consecutive hike. We have updated our simple RBA policy reaction function for the latest developments, including Q3 GDP data. It estimates where rates should be based on inflation and output. It includes the RBA’s forecasts for the CPI and GDP.
- The implied cash rate path of the equation not only remains above that of AUD OIS market pricing but also signals that the present rate should be higher given the current inflation and activity environment and outlook.
- Based on the RBA’s forecasts, the equation suggests a further 30bp of tightening in Q1 2023 with another 50bp in Q2. Either way, it points to the RBA pausing in the first half of the new year.
- The update lifted the rate path 5-10bp compared with the last month. The equation that includes house prices also saw a lift in the estimated rate path, as the pace of house price declines moderates, but the implied cash rate is still 40bp below that from the equation excluding house price developments in mid-2023.
- It is worth noting that these are just estimates and like with all econometric analysis, estimates are not predictions.
RBA cash rate estimations for Q2 2023 %
Source: MNI - Market News/Refinitiv/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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