Wednesday, 04 May, 2022
To: firstname.lastname@example.org“> Ashley Joye (ARCHR LLP )
Subject: FW: McCrann
Beware the interest rate experts who are finally waking up
The RBA will play it month to month with its interest rate decisions and any
economic expert making predictions out to the end of the year is beyond silly.
Fresh from not having a clue that the Reserve Bank would lift its official
interest rate on Tuesday – and even more, that it had to lift and why it had to
lift – the mixed assorted so-called experts spent Wednesday competing in
predicting how many more hikes would come and how quickly.
Westpac’s Bill Evans, who as recently as a month ago had been predicting the
first RBA hike would only come in August, before switching in early April to a
June hike but only a token 15 points, is now predicting there will be 40 points
in June on top of Tuesday’s 25 points.
To stress, a month ago, Evans was predicting it would be 15 points in June; now
it’s 65 points by June – on the way to 165 points, or 1.65 per cent, in total
by the end of the year.
There was one interesting standout from the usual rush of all the ‘experts’
from one side of the ship – I usually name it ‘Titanic’ – to the other.
Macquarie’s Viktor Shvets became the first out the door to predict the RBA rate
That’s the cuts that he said would come in 2023 after all those yet-to-be
As I wrote two Sundays ago, before the CPI figures came out, if inflation was
anywhere near what was generally expected, the RBA had to hike in May and it
had to hike by 40 points not the piddling 15 points that almost all the
‘experts’ were predicting would come in June.
Well, it didn’t do the 40 – that was clearly an initial step too far for RBA
Governor Philip Lowe, still on his journey back from his ‘not before ’24’
promise that he had maintained until as recently as November last year.
But at least he didn’t, so to speak, ‘piddle’ only 15 points.
Yet even after inflation printed at the 5.1 per cent that surprised all the
‘experts’, including those at the RBA, there were still ‘experts’ predicting
the RBA would wait until June – including most prominently former Reserve
Banker HSBC’s Paul Bloxham.
The inflation number didn’t surprise me.
On April 10 I wrote that we would see “inflation of well over 4 per cent for
the year to the March quarter”.
I also wrote that “Lowe would shred his and the RBA’s credibility if he did not
hike in May, if the inflation numbers come out as high as I expect.”
That was about when the economentariat started to rush like sheep from the ‘no
hikes until later in the year’ side of the ship.
I now want to caution you against the assumption that hikes are going to shower
down from the lofty heights of the RBA building in Martin Place Sydney – even
almost every month as Evans for example would have it.
I think we can pretty safely conclude there will be another hike in June –
subject to one huge qualification: no cataclysmic left-field event.
In the wake of Russia’s attack on Ukraine, this is no longer a formulaic
To put it at its most extreme, do you really think the RBA would hike if Russia
had gone nuclear?
But even at a saner level, what’s happening in and around Ukraine opens up
potentially huge geo-economic risks, the like of which we have never seen
Like if Russian oil and gas actually stopped flowing to Europe.
And then there’s China; again operating in a totally unprecedented way with its
zero-Covid policy and on top of an already imploding Miracle Growth Model.
In sum and in short, making rate predictions out to the end of the year is
The RBA really will play it month to month and we will as well.