RBA Speech

Governor Stevens spoke on Friday and suggested that rates are pretty close to the average of the last 10 to 12 years. They have recently started talking a lot more about 'average' rather than 'normal' as with changes in the make up of household debt levels (higher than in the past) normal is hard to define. He seemed to give a signal that a pause is fast approaching. According to the April board meeting minutes they almost paused this month so a May or June pause for some months is to be expected. The caveat here are the inflation numbers, to be released tomorrow. Expectations are for around 0.8% qtr (0.5% core) and 2.8% yr on yr (3.1% core) and the Governor indicated he thought it would be traveling within their target band.

As a consequence the yield curve has flattened slightly with the market starting to unwind some of the future rate hikes that had been priced in.