Reserve Bank of Australia statement due at 0330 GMT

Earlier:

Via ANZ

  • "We think the RBA will expect inflation to be 2% or higher for the duration of its forecast horizon. This would make its view that inflation will not be 'sustainably within the 2 to 3 per cent target range' until 2024, untenable.
  • We anticipate the RBA will shift its forward guidance to expecting a rate hike in the second half of 2023.
  • A change in forward guidance removes the rationale for the yield target. The RBA has two options: drop it altogether or shift to a shorter bond such as the Apr-23 ACGB. We think shifting to a bond that has just 18 months until it matures is not worth the effort, so we expect the yield target policy to be dropped. It has served its purpose. The RBA's failure to defend the yield target recently supports our expectation."

DB:

  • "Two-year yields last week rose from 0.15% on Wednesday morning to 0.775% at the close on Friday as the RBA were conspicuous by their absence in defending the 0.1% target on the April 24 bond. I've absolutely zero idea what they are going to do tomorrow which should help you all tremendously but their absence again this morning gives a decent indication. I was taught economics in an era where central banks liked to keep an element of mystery and surprise. As such I've always disliked the forward guidance era as it encourages markets to pile on to much riskier, one-way positions that a normally functioning market should naturally allow. But to go from forward guidance to silence (that rhymes) is a recipe for huge market turmoil if the facts change. It's unclear if the full implications of last week's carnage at the global front end has yet been cleared out."