Summary: Cash rate expectations path again slightly steeper through 2022, early 2023; cash rate now expected to average 1.275% in February 2023; inflation data provides more weight for 2022/2023 rate rises; no changes to ADI cash rates in survey.
Expectations again moved to reflect a slightly steeper path for the actual cash rate through 2022 and into early 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 slowly from the current rate of 0.050% to 0.13% by April 2022 and then increase at a faster rate through to February 2023 where that month’s contract price implied an average rate of 1.275%. A week ago, the February 2023 contract’s price implied an average rate of 1.145%.
Since March 2020, the RBA has not enforced its cash rate target by draining liquidity from the banking system via changes in the total of ESA balances. As a result, the actual cash rate, currently at 0.05%, has been noticeably below the target rate, even after the RBA reduced this target to 0.10%. As such, contract prices only reflect expectations of the average actual cash rate in a given month and not some estimate of the likelihood of the RBA changing its target.
Economic data or events which had the potential to affect domestic interest rate expectations, specifically inflation data, were received as more weight to the “rate rises in 2022/2023” argument.
The first notable report was on Tuesday. The Consumer Price Index rose by 1.3% in the December quarter, above expectations, taking the annual rate from 3.0% to 3.7%.
NAB’s December business report was released on the same day. There were falls in both confidence and conditions indices but the drop in the confidence index was particularly large.
Westpac and the Melbourne Institute released the December reading of their leading index a couple of days later. The annualised growth rate remained slightly under zero, implying GDP growth in the near term is likely to remain a little under “trend”.
The December quarter’s import/export index came out a little later that morning. The import price index rose by 5.8% while export prices increased by 3.5%. Over the year to December, import prices rose by 13.8% and export prices increased by 38.3%.
December quarter producer price indices were released at the end of the week. The PPI rose by 1.3% over the quarter and by 3.7% on an annual basis.
3 month BBSW is a useful benchmark for cash rates and it finished the week 1bp higher at 0.08%. Currently, the RBA’s target for the overnight lending rate between banks is 0.10% but actual overnight interbank loans are being negotiated at 0.05%, 5bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were no changes made by deposit-taking institutions in our survey of cash account interest rates this week.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 0.10% | |
| AMP Notice Account | 0.10% | Minimum 31 days notice |
| ANZ Premium | 0.15% | |
| ANZ Progress Saver | 0.20% | Minimum $10 deposit and no withdrawal per month |
| Arab Bank Online Savings | 0.50% | Minimum balance $500,000. |
| Bankwest Smart eSaver | 0.25% | On balances from $500,000 to $5,000,000. No withdrawal per month |
| BOQ Fast Track Saver | 0.05% | Minimum monthly balance of $5000. |
| BoQ Bonus Interest Savings | 0.30% | Maximum 1 withdrawal per month. |
| CBA NetBank Saver | 0.05% | |
| CBA Goal Saver Account | 0.25% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| Great Southern Bank | 0.35% | No maximum balance |
| Heritage Online Saver | 0.25% | Minimum balance $250,000 |
| ING Savings Accelerator | 0.65% | Minimum balance $150,000 |
| Macquarie CMA | 0.00% | Minimum balance $5000 |
| ME Online Savings | 0.05% | |
| NAB iSaver | 0.05% | |
| NAB Reward Saver | 0.25% | 1 deposit and no withdrawal per month |
| RAMS Saver Account | 0.15% | On balances from $200 - $500,000. Minimum $200 deposit and no withdrawal per month |
| Suncorp Growth Saver | 0.05% | |
| UBank USaver | 0.50% | Limit $200,000. Minimum $200 deposit per month. |
| UBank USaver Ultra | 0.05% | Limit $200,000. Minimum $200 deposit per month. |
| Up Saver Account | 1.05% | Calculated daily, paid monthly once qualfied |
| Volt Bank | 0.90% | Limit $245,000 |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.15% | Minimum $50 deposit and no withdrawal per month |
| 86400 Save account | 1.20% | On balances upto $50,000 |