Terry McCrann says February RBA rate cut almost certain
The probability of the Reserve Bank of Australia lowering the cash rate at its February board meeting increased, given the opening Herald Sun paragraph of Terry McCrann’s column late on Wednesday night that declared the Reserve Bank “will almost certainly cut its rate at its first meeting back for next Tuesday”.
Australian Financial Review coloumnist Christopher Joye noted this morning that traders reacted almost instantly and prospects of a February and/or March rate cut were revived.
Joye does not personally describe the probability of a February easing as “almost certain”.
Joye's best guess is it a still high 60% plus chance. And if they don’t go in February, they have laid the groundwork for doing so in March.
But Joye does note McCrann's past predictions immediately before board meetings used to be lethal, after he’d got the good oil from senior staff. But Joye says the RBA link isn't now as strong with McCrann.
McCrann has dubbed this the year of the mousetrap.
"Beware of getting caught, snatching for seemingly easy succulent cheese," he warned.
"This year was supposed to the year where the ‘experts’ could build their predictions — for share prices, for property, for interest rates, for the critically important value of the Aussie dollar — around one foundational certainty.
"This was that the US economy was picking up steam; so US interest rates would start going up after being at zero for nearly six extraordinary years, and would take the US dollar with them. Hullo an Aussie dollar heading for US70c, or even lower.
"But the year kicked off with a big event that nobody, and I mean nobody, predicted — the Swiss abandoning their attempt to keep the Swiss franc fixed against the euro.
"That’s combined with the almost as unpredicted plunge in the price of oil.
"At the start of every year, it’s worth repeating that the future is unpredictable.
"The greatest danger this year is thinking — and then acting on, or taking the advice of those ‘experts’ — as if it’s less unpredictable.
"In fact it’s probably more unpredictable than normal; and we are going to get a taste of that at the Reserve Bank’s meeting on Tuesday week.
"The RBA spent all of last year defying, first, confident calls that it was going to hike; and then demands that in fact it slash rates.
"It left rates, sensibly, calmly, unchanged.
"Now there’s absolutely no chance of a rate hike.
"The question is whether it signals it might cut; while a really low inflation number would put a rate cut smack on the table.
"What is absolutely certain is that the key language in RBA governor Glenn Stevens’s post-meeting statement will change.
"That would obviously be the case if he’s announcing a 25-point cut, but it would change to “signalling a future cut” even in the now unlikely case the rate was left unchanged," McCrann advised his readers.