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Tuesday, 14 August 2018

No rate hikes in 2018, 2019, 2020(?)...

Yield curve flat

The Reserve Bank now sees headline inflation falling back to 1¾ per cent, as electricity and fuel prices fall.

Kudos to Westpac economics for calling this. 

And the market is finally waking up to this reality.

No rate hikes are priced in, as far as the eye can see...

And a lot can change between now and 2020, of course.

Not least, the Prime Minister and the government!


If there's one key metric that will be watched keenly in relation to the above it's wages growth.

The June quarter wage price index is due out tomorrow morning, with the market expecting a 0.6 per cent quarterly rise.

The minimum wage increase this time around was some +3.5 per cent - however that won't flow through until 1 July. 

In other words, there may be some downside risk to the forecast.