Those of us who watch central banks spend many hours trying to read the tea leaves to divine the thoughts and plans of the technocrats who set interest rates.<\/p>\n
We were busy doing it when the Reserve Bank board released its post-meeting statement<\/a>, which contained familiar obfuscations, such as:<\/p>\n “The recent data suggest the risks to inflation have tilted to the upside” and “the board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions”.<\/p>\n Early views were that the RBA had shifted in a “hawkish” direction, where the possibility of rate rises was now on the table, but further rate cuts hadn’t been ruled out.<\/p>\n Then, just an hour later at her press conference, Michele Bullock threw out the teapot.<\/p>\n “It does look like additional cuts are not needed,” the RBA governor boldly declared.<\/p>\n “The private economy is recovering; it’s taking over from public demand.”<\/p>\n Loading…<\/p>\n And, if that answer left any doubt, the governor’s answer to a question from my colleague David Chau left none.<\/p>\n “So what’s the more probable outcome for next year? Interest rates going down or interest rates going up?” he asked.<\/p>\n After saying that she doesn’t like “probabilistic statements”, Bullock replied with far more certainty, at least as far as one option was concerned.<\/p>\n “I don’t think there are interest rate cuts on the horizon for the foreseeable future,” she declared.<\/p>\n “The question is, is it just an extended hold from here or is it the possibility of a rate rise?<\/p>\n “I couldn’t put a probability on those, but I think they’re the two things that the board will be looking closely at coming into the new year.”<\/p>\n Not since her predecessor Philip Lowe infamously declared in late 2020 and through 2021<\/a> that the board did not expect to raise interest rates until at least 2024 has an RBA governor been quite as explicit in their outlook for rates.<\/p>\n ‘Door has been opened’ to February rate hike<\/p>\n Economists scrambled to adjust their forecasts to the governor’s rhetoric.<\/p>\n CBA’s head of Australian economics, Belinda Allen, concluded: “The door has been opened for a rate hike as early as February based on the press conference.” Although she still doesn’t expect the RBA board to walk through it.<\/p>\n