Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Hawkish RBA on Rising Domestic Pressures

Wednesday, 22nd June, 2022

Daily Flows

  • A domestic BBB+ ADI gained some traction yesterday after offering 4.15% and 4.65% for 1 and 2 year funds respectively.
  • There was an otherwise pretty quiet day for our flows.

Hawkish Tones from Lowe

  • Governor Philip Lowe spoke yesterday, providing strong colour and added hawkish tones to the RBA’s rhetoric.
  • Lowe revealed that the Bank has only been considering moves of 25 or 50 basis points, ruling out 75bp moves as we have seen in the U.S.
  • The Bank noted that a 25 or 50bp increase “would leave the cash rate below 1 per cent, which would still be highly stimulatory and further increases would be required.”
  • The more hakiwsh tone now supports some analysts’ beliefs that the RBA will again hike by 50bps in July, with potential hikes every month until November.

Rising Domestic Pressures

  • Philip Lowe also highlighted the increasing domestic pressures on inflation, namely rising household spending and a historically tight labour market.
  • The Bank has upgraded its December quarter expectation of inflation to 7%, but remains confident that these levels will ease next year, partly thanks to supply side easing and stromg monetary tightening.

Lawrence Vosper

Business Analyst