Will the central bankers war force an RBA cut?

The raging global monetary war might be interpreted as putting heat on the RBA. In the past two weeks we’ve seen the ECB’s Mario Draghi ready to print more, BOJ’s Haruhiko Kuroda cut interest rates negative and jawbone about more and last night we got the Fed’s Bill Dudley declaring financial conditions too tight. Goldman has now pulled its March rate hike:

We are revising our Fed call, and now expect the FOMC to keep policy rates unchanged at the March 15-16 meeting. Incoming economic data continue to look broadly consistent with the committee’s outlook at the time of the December meeting. However, financial conditions have tightened meaningfully, and recent public comments suggest Fed officials see greater risks to the outlook from these changes than we previously had thought. We now expect the next rate increase at the June FOMC meeting, and see a total of three rate hikes this year. Even relative to our revised baseline forecast, risks are tilted to the downside—it is still easier to see the committee slowing down the rate of increases then speeding them up.

… developments in financial conditions have clearly not cooperated with our year-end outlook. Our Financial Conditions Index (FCI) has tightened by about 50 basis points (bp) since the December FOMC meeting, implying a hit to growth of about 40bp over a one-year period, if the tightening proves persistent (Exhibit 3). Before the last week, we were unsure about how policymakers would react to recent market volatility; officials may have expected some tightening in financial conditions after liftoff, and their threshold for responding was therefore unclear. However, recent comments suggest that policymakers see the tightening in financial conditions as excessive, with potential implications for growth and the path for policy later this year.