Latest Central Bank Expectations: RBA to Cut 125bp?!

Here are the latest central bank rate cut/hike expectations. Nothing priced in for the Fed, BoE or ECB (though I expect the latter two to pull the trigger on more stimulus in the coming months).

RBA – Investors are pricing in 125bp of easing from the Reserve Bank of Australia by the end of the year! I have been bearish the AUD but 125bp is a FAR out of line. At most the RBA will lower rates by another 75bp and more likely only 50bp by Dec.

RBNZ – Investors are also looking for 50bp of easing from the Reserve Bank of New Zealand.

Table: How NZ Economy Fared Since March Mtg

Aside from the Federal Reserve, the Reserve Bank of New Zealand also has a monetary policy announcement this afternoon. The RBNZ is expected to keep rates unchanged – hard to validate a rate hike when the RBA is planning to ease. Also, the last time the RBNZ met, Governor Bollard said “sustained strength in NZD would reduce the need for further increases in the cash rate.” – So it doesn’t look like rate hikes are in the pipeline until there is more evidence of a recovery. Nonetheless, here’s a table of how the economy changed since the last meeting:

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!

What Investors Expect Central Banks to Do in 2011 and 2012

Central Bank Interest Rate Expectations can and do change based upon economic and market developments. The last time I provided updated CB expectations was in July (yes, I apologize for being tardy) but since then we have seen major changes in investors expect central banks to do this year and next.

Here are the cliff notes

FED – Nada for 2011 and 2012

ECB – 25bp rate cut by Dec?! (In July no rate hike or cut was expected for 2011 and 1H2012)

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 – Major Rate Cuts Expected – 100bp by year end?!

RBNZ – No Major Changes, Rate Hike Expected March 2012

And here are the details: