The next move in rates (whenever it comes) 2024 edition

Have you considered updating? Might help communicating with people living today vs 100 years ago. Even our good friend Friedman was happy communicating this way. You could try changing the world instead but I mean no offence when i say you have zero influence in achieving that.

At very least, i'd suggest separating out "price increase" vs "currency debasement" from one another whichever words you wish to subscribe to. Relevant to gold and all.

 

Citi has downgraded all banks to sell as they are forecasting heavy rate cutting leading into the next election. basically, saying banks will become public punching bags for votes.

ANZ, WBC, CBA, NAB shares: Citibank downgrades “all banks to sell” with interest rate cuts to weigh on earnings (afr.com)

 

Computer says "No rate cuts"


Fed’s Preferred Inflation Gauge Is Set to Back Rate-Cut Patience - BNN Bloomberg

Fed's Goolsbee: 'It makes sense to wait' before cutting rates

Why Rush Into Cutting?: Scotiabank’s Forecast Tables

 

Wednesday's inflation data is big on this. Could have 6 month annualised inflation back in band.
Nothing to force rate cuts quickly, but another 0.6% QTRLY print would be encouraging and allow rate cuts to filter through if the economy slows down and employment does too later in the year. I.e. the inflation handbrake of rates will be less of a road block.
For all the noise about drivers of inflation (wars, low dollar, etc) - the main data metric that is measured is the the QTRLY CPI.

It should come down a lot too, a 1.4% print gets taken out and a ~0.6% print in --- will bring inflation down yearly to below 3.5 too.

 

tbh if you are saying they won't, i tend to think they probably will.

 

A rate rise cannot be ruled out
“There is still a risk that the next move is not a cut, even though that is widely expected,” Mr Picton said. “If we start to see a real acceleration in inflation in Australia, similar to what has happened in the United States, then you can’t rule out a further rate hike here in Australia.”

RBA interest rates: ‘You can’t rule out a further rate hike in Australia’

 

Equivelant of "X could go up down or sideways"

We should be begging for July's tax cuts, wage bumps and rate cuts. Sadly all of this will hardly make a dent. And we still have a significant portion covid-low fixed rate mortgages rolling off this year! Tightening will continue as it has done since November without any action from the RBA.







Absolute destruction. Not good.

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US and Australia don't even compare... Rate hikes in Australia destroy consumption as hikes hit consumer cash flow very quickly through variable rate mortgages - its actually quite effective. While US hikes destroy business lending instead, but takes time before companies are forced to layoff - the consumer takes a hit through short-term loans (credit cards, auto loans) but that also takes time to hit a ceiling... Existing mortgages remain unaffected given 30yr fixed loans, but real estate sales halt as noone wants to move... All seems fine until suddenly it's not. Slow at first then all at once. Apples and oranges.

This year will be full of boring bipolar noise. Next year the fun begins.

 

Inflation looks a little sticky.

Up 1% in March quarter.

 

dont get caught by the headline.

CPI was expected to be 0.8 was 1 - not exactly massive.

CPI still slowed to 3.6 from 4.1 a year ago. we are literally 0.6 away from being within "target"

Still trending down.

 

Gut feel is this will initially be a bearish reaction on the equity market and bond yield up situation.

Though after today/this week, the trajectory is still coming down and perhaps its just coming down slower than expected. Will still touch 3% YoY CPI within 2024 calendar year.

 

Spot on. Media love the negative.

Market expected 0.8 for Q1. Was 1 not exactly a big deal.

Annual CPI is 3.6 - we are a bee's dick outside of the RBA target of 2-3

CPI is still trending down.

 

Worth noting that education was a huge component of that 1% figure.

If we exclude the 5.9% for education inflation, it would only be around 0.4%. If you look back of the last 4 quarters, education was basically flat or slightly negative except for the same quarter last year where it was 5.3% at the time. I think this is just by nature of new calendar year school/uni fees rolling through to some extent so based on other quarters it is likely that sector goes back close to 0 again in the new few prints.

Rents are also one of the stronger results, but I suspect it is no secret that higher rates = higher rents if the market will take them.

I actually think this is a decent print with that context but I am no economist.

 

Yep.

We want to glide back into the 2-3 band. Not crash into deflation.

 

Yes agreed. Many of the other sectors have experienced a pretty big drop, look at the change from the previous quarter for things like housing, insurance, clothing, tobacco, transport. Obviously one print can be volatile but compared to the previous quarter many of those have plummeted!

 

yep - we are 0.6 outside the RBA's target range.

on track still.

 

Definitely no cuts coming any time soon. Plays in to what I expected quite perfectly.

 

What was your expectation? And how are you defining 'soon'?

I personally think 1-2 cuts before Christmas is still on the cards. Lot of people still coming off fixed rate over the next 6 months too so the slowdown will increase even with the RBA sitting on their hands.

 

One is still on the cards but next quarter the CPI has to be a 0.6% print. Otherwise no cuts for the second half of the year. Unless major international development occurs

 

Soon = 2024-2025.

Doesn't make sense for cuts at this stage of the land cycle and history also suggests it.

Especially with tax cuts to come, petrol, rents and house prices all rising, plus US inflation due to their stimulus still quite high, I just don't see cuts coming.

1 cut is still priced in, down from 8 in Jan and it's only a few months later.

Happy to be proven wrong, but so far, all my calls have been correct in terms of timing the markets (stocks and house prices). All in my opinion

As always, DYOR.

 

They won't cut until the annual rate is well within the 2-3%...so I guess however long it takes to get there. It's looking less likely this year doesn't it? I don't think the RBA will be too concerned if we overshoot and find ourselves in a pickle. If so, they'll just go more radical with the cuts. Their forecasting has always been off.

I was way wrong on how long it would take to get within the target band. Thought we'd already be there by now but it is what it is.