Let me begin by answering that question with a firm NO.
OK, on with the post.
Miss February linked to an article in the comments: A February rate hike needed, but will the RBA deliver? and asked what I thought. Its an interesting article, and worth sharing with a wider readership of those trading the AUD (thanks Miss F).
My (somewhat random) thoughts:
I see where the author is coming from but he hasn’t mentioned once that inflation is (so far) not a problem in Australia. Unless the RBA sees a danger of consumer price inflation rising they are not going to hike soon.
House price inflation, yep, there is that, and its an issue. The RBNZ seems to have had some success with macroprudential tools, though it is too early to make a definitive pronouncement. So perhaps macroprudential tools are used before a rate hike (I’ll be watching for signs of this).
I think the author is on the right track, though, with “after the market is softened up with a hawkish statement”. The RBA is a very conservative institution and they are not going to hike without some sort of warning (unless, of course, there is some sharp change to justify it, they can move fast if the situation warrants, but generally they move more slowly). But, to repeat, there is no need to hike at present (from an inflationary standpoint) … AND, the RBA would still like the currency lower (what they’d like isn’t always commensurate with what the market is going to do, but it will be factor weighing against an imminent hike).
So, the process I think might unfold (as long as CPI remains benign):
- Warning about considering macroprudential tools to stymie house price rises
- Actually implementing those tools
- (Then, should inflation rise) Warnings of rate hikes, becoming more hawkish
- Rate hike
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ps. The PMI surveys this week have been pretty awful (manufacturing, services, construction) but there is some important data coming up soon:
- We get NAB business sentiment survey data next week
- We get employment data next week (Thursday 16 Jan Australia time)
- On Jan 22 (or thereabouts) we get Westpac consumer sentiment
