The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60 per cent at 04:30 UTC this morning. The vote was unanimous across all nine members. Money markets had the move at 93 per cent going in. One hour later Governor Michele Bullock sat down in front of the microphones and said that maybe there did not need to be any more interest rate rises — and by the time Tokyo handed the book to London, the Australian dollar was 33 pips lower than it had been before the hike it was supposed to want. The print was the part of today you could have read in advance. The presser was not, and it is the part that moved money.
What the Bank changed, and what it merely repeated
Read the statement on its own and nothing changed. The Board’s own words: “Inflation remains elevated and some of the upside risks flagged in August are materialising,” and it “will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed.” That last clause is a tightening bias, retained verbatim. A system parsing the statement alone would conclude the Bank is still going.
Then read what the Governor said. Quoted by ABC News from the press conference: “If it turns out that the restrictiveness that we’ve introduced by these interest rate rises is enough to bring some of those inflationary pressures back then maybe there doesn’t need to be any more interest rate rises.” Minkabu’s wire at 15:11 JST adds that the Board examined both holding and hiking 25 basis points, and that four prior rises are expected to supply enough tightening. Diamond Zai put it in its headline: the Governor hinted today’s rise may be the last of the year.
So: the document repeated the bias and the person who signed it withdrew it, inside sixty minutes, on the same day, about the same decision. This desk’s job is to separate what was changed from what was repeated, and today those two things point in opposite directions through two channels of the same central bank. If your process reads the statement and not the presser, you are running on the half that did not move.
The number that mattered was 93, and it was in the price before you woke up
ABC News reported markets pricing a 93 per cent probability of the hike before the announcement, with a 67 per cent chance of further rises beyond it. Domain’s live blog carried an economist’s 90 per cent. All four major Australian banks had called 25 basis points. Newsquawk described money markets as fully priced. When a decision is priced at 93 per cent, the decision carries roughly seven per cent of new information and the commentary carries all the rest.
The tape agrees. AUD/USD was 70.11 US cents at 10:05 AEST before the decision. It printed 70.18 after the announcement — seven pips, which is the market saying it already knew. By 15:00 JST, after the presser, Diamond Zai has it at 0.6978: forty pips down from the post-announcement level and thirty-three pips below where it stood before a rate rise. AUD/JPY tells the same story more loudly, from around the 110.10s before the decision to a 110.70 spike after it and then 109.83 — a sixty-pip pop and an eighty-seven-pip give-back, ending twenty-seven pips below the start.
Note one thing on the ABC page, because it matters to anyone scraping it: the text describes the dollar as having risen one per cent to 70.18, while the same page gives 70.11 shortly before. Seven pips on 70.11 is 0.1 per cent, not one. We publish the two levels and not the percentage. We have no idea which base the percentage was taken from and we are not going to guess on your behalf.
We refused to publish a probability yesterday. We were right, and here is the number
At the Tokyo slot this desk declined to publish an RBA hike probability. The two figures in our file were 80 per cent, derived from interbank cash-rate futures and dated 7 September, and about 90 per cent attributed to Commonwealth Bank and dated 21 September. We said in print that these were not a vendor disagreement but two points on a rising series, that the containment check fails on the dates alone, and that presenting them as a spread would manufacture a conflict that did not exist.
The series ended at 93 per cent on the morning of the decision. That is the third point on the same line, and it settles the question in the direction we said it would: the gap between 80 and 90 was time, not measurement. We are recording this because the refusal cost us a number our readers might have wanted, and the discipline only earns its keep if we come back and mark it.
The other mark is the one that actually pays. We told you to size the 05:30 window rather than the 04:30 print. The print moved AUD/JPY sixty pips in the direction everyone expected and gave all of it back plus twenty-seven. If you had a straddle on the decision and flattened before the presser, you were correctly positioned for the wrong event.
Meanwhile the long end is doing something the RBA cannot help with
The Australian ten-year is at 5.43 per cent and the US ten-year at 5.23 per cent, per ABC’s pre-open read — an Australian premium of twenty basis points over the US at the ten-year point, with the RBA at 4.60 and the Fed above it. The US thirty-year is quoted at 5.57 per cent and described as the highest since 2004, a framing that several publishers were already running on 24 September as the long-end selloff extended. Gaitame’s morning note has the US ten-year peaking at 5.27 per cent overnight and calls that the highest since June 2007; we have not second-sourced that vintage claim and we are labelling it as one publisher’s.
A word on our own open item here. This desk has been carrying a disagreement about where the US ten-year actually is — 5.18 against 5.22 at the same timestamp. Today’s readings of 5.21, 5.23, 5.25 and 5.27 are not a widening of that dispute. They are a path: a session low, a pre-open level, an Asia level and a peak. We ran the containment check before writing this paragraph and it passes, so we are not publishing a four-way vendor conflict that does not exist. The original same-timestamp disagreement stands unresolved and we are not pretending otherwise.
Bullock was blunt about the constraint: “The Middle East conflict has been a big shock and it’s made us all poorer in this country,” and, of the same shock, “it’s making things much worse,” and on productivity, “Monetary policy can’t do anything about productivity.” On recession, “That is not our central base case at this point.” A central bank hiking into an energy shock it cannot influence, with a Governor saying so on the record, is a different trade from a central bank hiking into demand.
The sizing question, which is the only one we will answer
Dollar-yen spent the whole Tokyo session in 37 pips — 157.21 to 157.58 on Diamond Zai’s tape, 157.23 to 157.58 on Minkabu’s, a two-pip disagreement on the low that we note and do not resolve. At 15:00 JST it sat at 157.35. Gaitame’s published forecast band for today was 156.50 to 158.20, which is 170 pips wide, and 157.35 is exactly 85 pips from each edge. Spot finished Tokyo at the precise midpoint of a band it never came close to testing, having used 22 per cent of it.
Now put that against the options. Minkabu’s vol page at 10:44 JST has one-week dollar-yen implied at 10.50 per cent and one-month at 9.24 per cent. Ten and a half per cent annualised is about 104 pips of one-standard-deviation daily range at 157.35. Tokyo delivered 37, or 36 per cent of a one-sigma day, in the session that contains the month-end and quarter-end fix. Minkabu’s morning wrap names exactly that: month-end and quarter-end factors plus major US data later in the week, keeping people still.
So the mechanical read into London is: you are paying for 104 pips and Asia gave you 37, the vol is elevated because the authorities are watching and not because the market is moving, and the session that historically resolves this is the one starting now. If you are short gamma, Asia paid you today. If you are long it and your model prices a full day of range across twenty-four hours rather than weighting the London and New York hours, you overpaid for the eight hours that just finished and you are about to be under-hedged for the eight that matter.
What this does not tell you
It does not tell you the RBA is finished. “Maybe there doesn’t need to be any more” is conditional on inflation actually coming down, and the same Governor said in the same hour that the Bank will raise rates as needed. Both sentences are real. The market chose to trade the first one; that is a fact about positioning, not a forecast. ANZ is reportedly the only major bank pricing a November rise, and the 4.85 per cent terminal figure in our file comes from Commonwealth Bank and Westpac at second hand and dated 21 September, with a separate reader dating the market’s 4.85 expectation to February. None of that is settled.
It does not give you a verified vote breakdown beyond unanimity. The Bank’s own release says the decision was unanimous and two secondary readers say nine members; that closes the question Westpac lost by forecasting a split, but the Board’s deliberations are known to us only through the Governor’s account that a hold was considered.
It does not second-source the AUD/JPY extremes to the pip. The 110.70 spike and the 109.83 low are one publisher’s tape. The AUD/USD path has two publishers behind it at different timestamps rather than one continuous series. And we quote no crude level at all today: this desk published yesterday that its sources disagreed about the direction of WTI on 28 September, that dispute is not closed, and one morning note describing an intraday spike above 93.50 is not a resolution.
Finally, it does not tell you which way to be. It tells you that the information arrived at 05:30 and not at 04:30, that a statement and a press conference are two different data sources about one decision, and that if your calendar had one entry for this event it had the wrong one.
Related
- FX events calendar — central-bank decisions and press conferences as separate entries, in UTC.
- Signals — how we treat a fully priced decision with an unpriced commentary window behind it.
- EA presets — news-window filters, and why the presser needs its own.
