Australia | Sep 08 2006
By Rudi Filapek-Vandyck
Was it just our imagination or did we sense the general mood within the local economist community slowly changing from probably one more rate hike in November towards maybe this is it?
Our suspicion was answered today with HSBC Chief Economist Australia and New Zealand John Edwards (of former Labor government fame) virtually changing camps on the matter.
Previously, Edwards suggested another rate hike later this year was the way to bet on the matter (unfortunately, given the impact on the bond market and thus other assets this is sometimes necessary). His latest assessments, however, paint a different picture.
“We had thought another (and final) 25bp increase in November a little more probable than not, but the [recent economic] data isn’t helping the case”, Edwards comments today. “The chances are now right down to fifty fifty. It will need another elevated outcome for core inflation in the third quarter numbers due October 25 to zip up another tightening, and if the global oil price continues to weaken and the US housing sector continues to fade even that may not be enough.”
Edwards sees recent economic data as very mixed and now seems to suggest the odds have shifted towards no more rate hike as the data show an Australian economy “growing only moderately, with exports continuing to disappoint and business equipment investment slowing”.