Jobs data and SNB surprise economists

ECONOMISTS were dealt two big surprises this week.

LOCALLY it was strong December jobs figures, while internationally, it was the Swiss National Bank's decision to step away from its currency cap.

But ahead of the jobs figures, economists at another of the big four banks changed tack to forecast a rate cut from the RBA this year.The latest, joining his counterparts at Westpac and NAB, was ANZ Bank chief economist Warren Hogan."Weaker growth and lower inflation in 2015 will provide the RBA with a reason and the scope to take the cash rate down 50 basis points to 2.00 per cent over the first half of the year," he said.Then came the jobs figures, with unemployment falling and employment rising solidly.That encouraged Commonwealth Bank economists Gareth Aird and Michael Workman to stick to their guns."Labour market trends are a key determinant for monetary policy settings. And today's figures are commensurate with our view that the RBA won't cut rates further."Citigroup's Josh Williamson and Paul Brennan saw it much the same way, saying the figures were a "perfect storm of positive labour force data"."It could also be an important driver of boosting `animal spirits', something the RBA governor has wanted for some time," they said."We continue to hold our view that the RBA will be sidelined for all of 2015 and return to a hiking bias in early 2016."But Bank of America economists Saul Eslake and Alex Joiner were not getting too carried away."This result clearly reduces pressure, which may have been building, for the RBA to ease policy in the short term. Nonetheless, we continue to expect that the unemployment rate will rise in 2015 reaching a peak just over 6.5 per cent."And ANZ's Warren Hogan just tweaked his forecast a little."The main impact of these numbers on our monetary policy view is around the timing of rate cuts," he said."Today's figures, particularly if validated with another unemployment reading below 6.3 per cent in January, will mean the RBA would likely wait for the seasonal re-analysis (of the jobs figures) in March."This would then rule out a March rate cut and push back the timing of the first move to May, after the Q1 CPI (consumer price index) read."The SNB's decision, which came without without warning, to stop capping the franc against the euro caused anguish among traders betting the franc would not rally, which it did with a vengeance.AMP Capital chief economist Shane Oliver called the event "francogate" but said it's hard to get too excited by the surge in the franc, because Switzerland is after all only a small economy.But it does have implications for Australia, Dr Oliver said."For Australia, the Swiss gyrations underline the problem that outside the US lots of countries would like to get their currencies down, making it harder for the $A to fall on a trade weighted basis, which in turn means it will have to fall further against the $US."

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