Investors ramped up Federal Reserve and RBA rate increases bets after another set of surprisingly strong US economic data.
Interbank futures are now pricing the RBA cash rate to top 4.4 per cent by September, and expect it to stay above 4 per cent until mid-2024, compared with 3.35 per cent now. They had implied the cash rate would peak as far as 3.6 per cent earlier this month. They ascribed a 92 per cent chance of a quarter-point lift at the RBA’s policy meeting next week and a small chance the RBA would hold steady.
In the US, futures expect the Fed funds rate to top 5.40 per cent by July, from 4.58 per cent now. The markets have also priced in rate increases over the next four meetings.
US consumer spending jumped 1.8 per cent last month, against forecasts of a 1.3 gain. The personal consumption expenditures (PCE) price index, tracked by the Fed for monetary policy, rose 0.6 per cent last month. It has accelerated 5.4 per cent in the 12 months through January.