Matty Johnson is one of the best in the business. His message: there is risk that the RBA is sitting on the sidelines until next year:
"This time may be different, but it’s an empirical fact that rolling calls seldom works (especially rate-hike calls) – this is because data trends, so soft data tends to be followed by soft data. Thus, if growth data wasn’t strong enough to motivate a hike in October, it probably won’t get there for a while. It therefore follows that unless the RBA is pushed by strong Q3 CPI, they may be on hold for some time.
Our proprietary coincident indicator suggests the economy is currently around trend, and the leading indicator suggests growth will fall below trend growth over the next few quarters. If the economy continues to track our tools the ‘growthcase’ for tighter policy is likely to weaken before it strengthens. On the basis of the most recent data, our leader does not forecast above trend growth until Q2’11."
