Surface-level the RBA statement might have looked neutral today. But dive into the detail and the central bank is clearly hawking up, as I expected. Australia's best trading strategist, Matt Johnson at UBS, confirms this in a terrific note summarising the bank's position:
"The RBA left their target for the overnight cash rate at 4.5% this afternoon, and restate that policy is appropriate – but added the rider that it was only appropriate ‘for the time being’.
Though the RBA’s overall assessment remained ‘around trend’, their tone suggests an upgrade. Very strong Q2 household consumption caused the RBA to drop their assessment that households are displaying caution, and the RBA upgraded their business investment outlook to ‘increase strongly’.
The main break on the RBA remains their assessment that the global outlook is ‘somewhat uncertain’. Given the strength of the domestic data, clarification of this outlook may clear the way to hike as soon as October.
RBA Gov Stevens concluded that ‘the Board judged this setting of monetary policy to be appropriate for the time being’. The last time Gov Stevens used this phrase was in February 2010 – the RBA tightened 25bps at each of the next three meetings.
The re-introduction of the ‘time being’ language is probably a signal that the RBA may lift rates as soon as the next meeting (5 October). We forecasts +25bps to 4.75% on 2 November."
