The Reserve Bank wants to remain invisible during an election campaign. The market says it does not have that luxury.
, but wages data due after its May meeting.
That may well be true, and the market, while a little suspect, appeared convinced that a May move was not a highly probable outcome. Instead, it settled on the safety of June.Ahead of the 11.30 AEST CPI release, the May interbank contract price implied a cash rate for that month of 0.15 per cent, suggesting only a modest probability that the RBA could reach the speculated 0.25 per cent level.that implied rate shot up to 0.23 per cent.
Economists, like Citi, are now rightly pointing out that delaying a rate hike that the market believes is beyond inevitable risks politicising monetary policy more than actually hiking. “The independent RBA needs to make the right policy call regardless of the timing of the election cycle,” they wrote following the CPI release.RBC Capital’s Su-Lin Ong held a similar view: that it’s less political to move in May and again in June, than to move in June and July, as RBC too brought forward the timing of its forecast hikes.
“Moving both during the election campaign and then again immediately after the federal election , rather than just after, may well take some of the politics out of this impending tightening cycle,” Ms Ong told clients.The times are very different to 2007, and as Federal Reserve governor Jerome Powell and Joe Biden have come to realise,
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