Bullock Flags March as “Live”

• Energy risk remains front and centre. With the Strait of Hormuz effectively offline and reports of production pauses in parts of Qatar and Iraq, the key variable now is time.
• The longer supply remains constrained, the more upward pressure we’re likely to see in oil and with that, a renewed inflation impulse filtering back through global markets.
• On the policy front, Governor Bullock struck a steady tone yesterday but left little doubt that the Board is keeping its options open. When asked directly about consecutive moves, she made clear that March is very much “live”, with the pace of tightening dependent on how the data evolves.
• Markets have reacted accordingly, now fully pricing a 25bp move by May from the current 3.85% cash rate, reflecting a shift toward a more hawkish near-term bias.
• Domestically, the focus now shifts to Q4 GDP. Expectations sit around 0.8% q/q and 2.3% y/y numbers that would confirm momentum is improving and that private demand is increasingly carrying the recovery.