Look at Australian Economy Ahead of RBA

The Reserve Bank of Australia is gearing up to cut interest rates this evening. The market is currently pricing in 32bp of tightening which means that investors expect the central bank to reduce rates by a minimum of 25bp. 50bp is a possibility but given some signs of improvement in Australia’s economy (jobs and construction/services), I expect a more moderate move. Here’s a table comparing how economic data has fared since the last monetary policy meeting on April 3rd.

Table: How Australian Economy Performed Since Feb Meeting

RBA meeting coming up. Here’s a table on how the Australian economy performed since the last monetary policy meeting in Feb. As you can see, there has been as much improvement as disappointment but the pullback in manufacturing and service sector activity is particularly worrisome. Market is pricing in 50bp of additional easing from the RBA this year and based on recent data, the RBA will need to remain dovish

Central Bank Rate Hike Expectations – Who is Expected to Ease

Central banks have been particularly vocal since the beginning of the year, either by expressing their skepticism or satisfaction with the easing of credit conditions and incoming economic data. For some countries, this has changed rate hike expectations, for others it simply confirms existing views. As you may know, central bank rate hike expectations change often but here’s the latest. Find out which central banks are expected to keep monetary policy unchanged in the coming year and which ones are expected to ease below!

Federal Reserve – No Changes in 2012 (surprise, surprise)

European Central Bank – No more Rate Cuts in 2012 – upgrade from the pricing in of 25bp of easing in Jan

Bank of England – No Changes in 2012

Bank of Canada
– No Changes in 2012

Reserve Bank of Australia
– Mkt was pricing in 75bp of easing this yr back in Jan, now only 50bp expected

Reserve Bank of New Zealand – No Changes in 2012

And here are the details!

What are Central Banks Expected to do in 2012?

The New Year has begun and it is important to see what the market is pricing in for central banks this year. As you may know, central bank rate hike expectations change often but as of last week, most central banks are expected to keep monetary policy unchanged in the coming year but one is expected to ease aggressively. Find out who below!

Federal Reserve – No Changes in 2012

European Central Bank – Possible 25bp Cut before Year End

Bank of England – No Changes in 2012

Bank of Canada – No Changes in 2012

Reserve Bank of Australia – Aggressive Rate Cuts this Year, 25bp by March!

Reserve Bank of New Zealand – No Changes in 2012

And here are the details!

FOMC, ECB, RBA Meetings: What is Priced in?

The Federal Reserve, European Central Bank and the Reserve Bank of Australia have monetary policy meetings scheduled this week and some investors expect these central banks to change monetary policy. Here’s what the market is pricing in according to interest rate futures. You can compare them with the Central Bank expectations back in September. What is interesting is that the market does not expect the ECB to cut interest rates this year even though many economists predict a 50bp cut in December.

FED – Nada for 2011 and 2012

ECB – 25bp rate cut by July (sharp upgrade from Sept when rate cut expected in Dec)

BOE – Nada for 2011 and 2012 but slight shift to dovish bias

BOC – Rate Cuts now expected in 2012, down from rate hike by April

RBA – 25bp Rate cut by Dec – upgrade from 100bp by year end

RBNZ – No Major Changes, Rate Hike Expected July 2012

And here are the details: