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Patient RBA set to hike rates only gradually

The RBA abandoned its yield target and its pledge that rates will remain low until 2024 today, but still sounded dovish. While the financial markets expect the first rate hike in May next year, we expect the Bank to wait until early-2023.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Australia & New Zealand Economics Weekly

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Australia & New Zealand Economics Update

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More from Marcel Thieliant

Australia & New Zealand Data Response

Australia CoreLogic House Prices (Oct.)

Strong demand means that house prices will keep rising at a strong pace over the next few months, but we think that lending restrictions will result in a slowdown next year.

1 November 2021

Japan Economics Update

Fiscal policy will continue to support the recovery

The supplementary budget that PM Kishida will compile by year-end will probably contain only half as much fiscal support as was provided last year. However, given that government spending will still be significantly larger than it was in 2019 even as output returns to its pre-virus level, fiscal policy will remain expansionary. We expect the economy to return to its pre-virus path next year.

1 November 2021

Australia & New Zealand Economics Weekly

RBA set to ditch yield target next week

The rise in trimmed mean inflation into the RBA’s 2-3% target band for the first time in six years has only added to the aggressive repricing in the outlook for the RBA’s policy rate over the past month. And given that the RBA refrained from intervening this week to prevent the yield on the April 2024 bond from surging far above its 0.10% target, we now expect the Bank to signal that rates will rise before 2024 at next week’s meeting. That means that the yield target will no longer be fit for purpose and we expect it to be ditched altogether.

29 October 2021
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