VIEW: McCrann Suggests June Pause Is Unlikely

The latest piece from RBA watcher Terry McCrann (click for full story) notes that “Phil Lowe and everyone with a home loan should be alarmed. The latest wages data suggests that the RBA is unlikely to pause interest rates again in June.”

• He goes on to suggest that “for right now, we are at the very brink of that dreaded wages part of the ‘wages-prices spiral’ that could send the RBA’s official interest rate, and home loan rates with it, significantly and punishingly higher.”
• A quick reminder that our policy team’s latest insight piece noted that the RBA believes that unemployment likely sits below NAIRU (click for full story), while an earlier piece from the team highlighted its understanding that “markets and macroeconomists are consistently underplaying the potential for higher Australian interest rates, creating a disconnect with what the Reserve Bank of Australia sees as its consistent communication of its determination to achieve its inflation target (click for full story)
• RBA-dated OIS pricing shows 4-5bp of tightening for next month’s meeting which comes on the heels of this month’s hike. The latter caught many off guard after the Bank’s April pause.