Quicknote: RBA unlikely to signal panic ahead of potential Fed Pivot
There's no doubt that last week's inflation numbers were bad and will worry the RBA. But we don't think they're enough to change course from a 25bpts rise to a 50bpts rise. A full 50bpts move will signal panic and that's something no central bank wants in the current climate.
We think the RBA will continue to echo its peers at the ECB and Bank of Canada in that rate rises are necessary but not at the expense of financial stability.
We think the RBA will move by 25bpts but will make it clear that more rises are coming, in calculated steps. We'll probably see three or four more 25bpts moves, perhaps lasting a little longer than previously expected. The RBA will also want to see what happens this week with the Bank of England and US Fed in their statements. There are murmurs of a potential pivot in the commentary.
Bottom line: It's a fine balancing act, but the RBA is so far leading the developed world in a balanced approach. Rate rises have already started to bite and will continue to dampen growth. It's very important to signal a balanced, measured approach, even if it means inflation remaining higher for a bit longer.
Panic is the worst possible outcome and a 50bpts move would be just that. As we saw in the UK earlier last month, the global financial system is still susceptible to financial shocks.