First my old friend Peter Martin covers this Tim Colebatch compare and contrast of the RBA Governor's rather varied views on the risks of a two-speed economy. He then makes the following interesting point on the basis of intelligence purportedly obtained directly from the RBA itself (I had myself opined that the market pricing made little sense to any sane observer):
"It is the first time board minutes have explicitly referred to the need for higher interest rates since December 2007, a declaration that was followed by two successive rate hikes taking rates to their highest point in more than a decade.
The Bank is determined that financial markets get the message that rates are likely to go up and stepped up the rhetoric because it believed they had failed to 'join the dots'.
It is particularly concerned that before the last board meeting the futures market was actually pricing in rate cuts when it should have been pricing in rate hikes."
