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The Reserve Bank should be alert to stubborn price pressures, it’s their job to be so, but they should not be alarmed, writes Pendal’s Tim Hext.
The Australian dollar and bonds were sent into a tailspin after hot US inflation figures prompted traders to price out the chance of some rate relief from the Reserve Bank in 2024.
RBA watchers commended governor Michele Bullock’s clear communication about quashing inflation at her first media conference. The market’s conviction was more fleeting.
A US official poured cold water on hopes of aggressive rate cuts as soon as March, leading traders to temper bets of eventual rate relief from the Reserve Bank too.
Bond markets are pricing more aggressive monetary easing in the US and Australia after the Federal Reserve flagged a peak in interest rates.