VIEW: Westpac Look For Pause In April, Lower Terminal Rate Call

Westpac note “we have lowered our terminal rate for the RBA in this tightening cycle from 4.10% to 3.85%. We now expect a pause in April to be followed by a final increase of 0.25% at the May meeting.”

• “Prior to the Governor’s surprisingly hawkish response to the December quarter Inflation Report where he effectively signalled consecutive rate hikes in both March and April, Westpac had expected that there would be a pause in April with a final hike in May.”
• “The Governor has had an ‘about-face’ following the March Board meeting. He responded to the disappointing growth print for the December quarter; the slower than expected wages gain in the December quarter; and the 0.4% fall in the monthly inflation index in January.”
• “In the Statement following the March decision he noted: “The Board expects that further tightening of monetary policy will be needed … assessing when and how much further interest rates need to increase…””
• “So, the tentative signal in March was much changed from the confident signal in February.”
• “Following a speech the next day (March 8) the Governor noted that a pause in April would be considered in the light of the data flow out to the Board meeting on April 4 – specifically: the business surveys; the February employment report; the February retail sales report; and the monthly inflation indicator report for February.”