A recent spike in funding costs is happening at the worst time for Australia’s big banks, as intense public scrutiny crimps their ability to pass on increases to customers.
In a subsequent speech the Governor strengthened his commentary around the AUD referring to it as “overvalued, and not just by a few cents”. He did not go as far as restoring the easing bias but did quote market pricing as indicating that ” if a move were to occur over the next several months … it would be down not up”. He also noted that “we still have ammunition on interest rates”. Market pricing is now pointing to a 40% probability of a rate cut by year’s end.
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