McCrann has just published and moved the markets in a major way. I would love to see the RBA pause in October to prove the Shadow Governor wrong (I actually like McCrann a lot, and he is bright, but it is very silly that he still moves markets based on pure speculation, which has its legacy in the RBA historically wording him up).
The argument for going in October and not November actually belongs to UBS's Matt Johnson. He published on the tactical merits of this first. My own view is that these are crazy optical games and the RBA should go the one-two punch in November and December just prior to the Christmas retail surge to remind punters of the need for austerity (to borrow a phrase from our European cousins).
There also need not be some hard rule that prevents the RBA hiking after a soft CPI print, which is the concern about going in November. On the contrary, this would remind the market that the RBA is looking forward, not back. Either way, rates are heading up some time before the end of this year barring any external disaster, as I have thought for a while now.
Here is a taste of what old-man-McCrann had to say:
"THE Reserve Bank is now more likely than not to raise its official interest rate in two weeks. But if it doesn't, that does not make a rate rise on Melbourne Cup Day a - what else would you expect me to write? - racing certainty. But a rate rise in a fortnight could just as equally be followed by another rate rise on Cup Day. That's to say, three scenarios are possible over the next few weeks. Two rate rises, one - at either of the next two meetings - or none at all. The reason is the tantalising conundrum facing RBA governor Glenn Stevens - that he really has to start raising rates to head off rising inflation before he really knows if there is going to be rising inflation."
