Australian interest rates

Via Ken Rogoff at the AFR: A number of leading US progressives, who may well be in power after the 2020 elections, advocate using the Fed’s balance sheet as a cash cow to fund expansive new social programs, especially in view of current low inflation and interest rates.

In the post truth world, stating the obvious today makes you a veritable genius, via Micheal Every at Rabobank: Coincidence and subsidence Only three trade war updates today worth mentioning, all of which should leave markets brimming with optimism.

Boom!

Why does a lunatic RBA keep throwing itself under the bus?

From the RBA’s chief loon today: As you would be aware, the Reserve Bank Board met yesterday and left the cash rate unchanged at 1.5 per cent.

The RBA is out with its monthly statement of lunatic ramblings and it’s neutral forever versus rate cuts ahead forever now: At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Via Westpac: Westpac’s RBA forecast means its too early to take profit. Source: Bloomberg, Westpac Given Westpac’s altered RBA and Fed outlooks, we have a very different forecast for the benchmark AU-US 10yr bond spread than is currently factored-into the forwards (left chart).

All care and no responsibility as usual: Shadow Board’s Conviction that Rates Should Remain on Hold Strengthens Australia’s economy is not showing a clear direction.

Goodness me, business indicators just printed a shocker: Damien Boey at Credit Suisse sums it up nicely: The Consensus “now-cast” for 4Q GDP growth is converging on 0.2%.

Melbourne Institute monthly inflation continues to print weak with February in at another lousy 0.1% with annual rebounding to 1.7% on a favourable base effect: Trimmed mean was in at zero and 1.4%.

By Justin Smirk, senior economist at Westpac Key points: The CPI rose 0.5%/1.8%yr in Q4; the average of the RBA core inflation measures rose 0.4%qtr/1.8%yr.

Right on cue in Parliament comes the Governor of the Lunatic RBA: My colleagues and I welcome this opportunity to share our views on the Australian economy and the RBA’s important policy responsibilities.

Not least because they point backwards while leading indicators are in the toilet.

Via Westpac’s Bill Evans: Westpac now expects the Reserve Bank to cut the cash rate by 25bps in both August and November this year.

Some more heavy hitters join the MB outlook today, via the AFR: Ellerston Capital’s head of global macro, Brett Gillespie, believes there is a solid chance that the Reserve Bank of Australia will cut interest rates sooner than the market expects, and before May’s federal election, to counter the property correction.

Via Bill Evans at Westpac: The minutes of the Reserve Bank Board meeting for February have largely confirmed the themes which were set out in the February Statement on Monetary Policy.

Via the RBA come minutes: International Economic Conditions Members commenced their discussion of the global economy by noting that growth in Australia’s major trading partners had been above trend, despite moderating in the second half of 2018.

Via The Australian: The Reserve Bank has called on education authorities to help ­arrest the sharp decline in the number of senior students in NSW studying economics, by ­elevating the status of the subject within the curriculum.

The warnings of slower services activity spreading from the housing bust continue to mount.

Goldman yesterday pushed out its rate hike expectations to mid-2020: We still view the most likely scenario as one in which the economy navigates a key risk period over the first half of 2019 and interest rates edge higher over the medium term – albeit somewhat later than we previously forecast.

Missed this earlier in the week.

Funny stuff in a carrion comfort kind of way, via AFR: Existing owner-occupier variable rates with principal and interest payments will rise by six basis points and those with interest only by 16 basis points. The hikes, which apply from February 21, impact all loan to value (LVR) bands.

George Tharenou at UBS has finally joined MB: Recent data clearly shows that the pace of growth is slowing, with weakness in retail, car sales, resi & non-resi approvals, business surveys, home loans & credit.