These human headlines are wrong:
“Australian households face up to three more Reserve Bank cash rate increases, after carnage in global bond markets stoked speculation the central bank will be dragged into the US Federal Reserve’s efforts to tame inflation”.
““Central banks including the RBA don’t want to hike rates, but they might be forced into it,” said Vimal Gor, chief investment officer at Sydney asset manager Trovio.”
“While Australian and US interest rates have not always moved in the same direction, AMP chief economist Shane Oliver said similar fundamentals between the two economies would force the RBA to respond to offshore developments”.
I might add that the local bond market is also wrong in backing up rates in sympathy with the US.
There is no reason why the RBA would follow the Fed as a principle. It will all depend upon the Australian economy.
The goods prices that might be affected by currency moves are mostly deflating anyway. The RBA is much more concerned about sticky inflation in services triggered by wages, rents and energy. And perhaps the house price rebound lifting demand.
However.
- Wage growth is obviously fading as the labour market weakens and the immigration supply shock continues.
- Energy will fade for this year thanks to bill subsidies.
- Rents are a big problem for the economically vulnerable but not enough to drive rate hikes by themselves.
- House prices are rolling over again.
My view is that the RBA is probably done and the Fed hiking again will reduce the possibility of more RBA hikes as global market volatility roars and global recession spreads.
