The RBA is caught between poll and markets

Treasurer Josh Frydenberg has reminded the Reserve Bank of Australia of its plan to wait for wages data due later this month before increasing interest rates, but most of the major banks are urging the RBA to move next week, right in the middle of the election campaign.the government sought to turn the impending interest rate increases to its advantage by arguing inflation was being driven by global factors and that the Coalition was the best option to handle the situation over coming moths.

“I can only point you to previous statements that they have made where they have said they want to see inflation sustainably within their band, and they also want to see significant wages growth before they start to move,” he said. But financial markets have fully priced in a 15 basis point lift in the cash rate next week to 0.25 per cent from 0.1 per cent.

Macquarie economist Justin Fabo also forecasts the RBA to wait until June, when he projects an increase of 40 basis points. Should rates increase next week, the Coalition is hoping its perceived strength as an economic manager, plus a general realisation among the public that the record low cash rate of 0.1 per cent was unsustainable, will mitigate against the obvious political downside.

Josh should just pull his head in, and start preparing for his exit, 3 more weeks to go!! 🙋‍♂️🙋

They’re only caught between poll and markets if they’re not doing their job. The RBA needs to leave politics to the politicians and focus on its duties.

Inflation is well above the RBA’s target range. They must raise interest rates or they risk being seen as partisan for the Coalition during an election campaign, losing public confidence and falling into disrepute.

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