Summary: Cash rate expectations path noticeably less-steep; cash rate now expected to average 3.19% in May 2023; 3-month BBSW down 12bps; four increases to surveyed ADI cash rates.
Expectations moved to reflect a noticeably less-steep path for the actual cash rate through the remainder of 2022 and most of 2023 in comparison to its path at the end of the previous week. At the end of the week, contracts implied the cash rate would rise from the current rate of 1.31% to 1.75% in August and then increase to 2.08% by September. November contracts implied a 2.755% cash rate while May 2023 contracts implied 3.19%. A week ago, the May 2023 contract’s price implied an average rate of 3.675%.
Since March 2020, the RBA has not enforced its cash rate target by draining liquidity from the banking system. As a result, the actual cash rate has been noticeably below the target rate. As such, contract prices only reflect expectations of the average actual cash rate in a given month and not the implied likelihood of the RBA changing its target.
Notable data or events which have the potential to affect domestic interest rate expectations included quarterly inflation figures as well as a swag of secondary economic reports.
The first notable report was on Wednesday. The Consumer Price Index rose by 1.7% in the June quarter, basically in line with expectations, taking the annual rate from 5.2% to 6.1%.
June’s preliminary retail sales report came out the next day and it indicated retail spending had increased by 0.2% over the month, less than market expectations. However, sales still increased by 12.0% over the year, up from 10.2% in May.
The June quarter’s import/export index came out at the same time. The import price index rose by 4.3% and export prices increased by 10.1%. Over the year to June, import prices rose by 22.1% and export prices increased by 38.7%.
At the end of the week, June’s private credit report indicated total lending had increased by 0.9% over the month, more than expected but in line with May’s increase.
June quarter producer price indices were released on the same day. The PPI rose by 1.4% over the quarter and by 5.6% on an annual basis, up from 4.9% in the December quarter.
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3-month BBSW is a useful benchmark for cash rates and it finished the week 12bps lower at 2.12%. The RBA’s target for the overnight lending rate between banks is 1.35% but actual overnight interbank loans are still being negotiated at 1.31%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were another four increases made by deposit-taking institutions in our survey of cash account interest rates this week. NAB raised its iSaver account rate by a modest 5bps, the Bank of Queensland upped its Bonus Interest Savings Account rate by 20bps, RAMS increased its Rams Saver Account by 25bps and Up Bank hiked its Saver Account rate by 50bps.
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 0.10% | |
| AMP Notice Account | 0.10% | |
| ANZ Premium | 0.15% | |
| ANZ Progress Saver | 1.15% | Minimum $10 deposit and no withdrawal per month |
| Arab Bank Online Savings | 1.00% | Minimum balance $500,000. |
| Bankwest Smart eSaver | 0.70% | On balances up to $500,000.99. No withdrawals per month |
| BOQ Fast Track Saver | 0.05% | Minimum monthly balance of $5000. |
| BoQ Bonus Interest Savings | 0.80% | Maximum 1 withdrawal per month. |
| CBA NetBank Saver | 0.35% | |
| CBA Goal Saver Account | 1.25% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| Great Southern Bank | 1.20% | No maximum balance |
| Heritage Online Saver | 0.85% | Minimum balance $250,000 |
| ING Savings Accelerator | 1.70% | Minimum balance $150,000 |
| Macquarie CMA | 0.50% | Minimum balance $5000 |
| ME Online Savings | 1.60% | On balances up to$250,000. Make at least four tap & go purchases per month |
| NAB iSaver | 0.35% | |
| NAB Reward Saver | 1.25% | 1 deposit and no withdrawal per month |
| RAMS Saver Account | 0.65% | On balances $0 - $500,000. Minimum $200 deposit each month and no withdrawals |
| Suncorp Growth Saver | 2.00% | Minimum $200 deposit each month and no more than 1 withdrawal |
| UBank Save Account | 1.60% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Up Saver Account | 1.85% | On a combined balance of upto $250,000. Minimum $200 deposit each month into Spend or Save accounts. |
| Westpac eSaver | 0.30% | |
| Westpac Reward Saver | 1.35% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. |