“Global inflation remains very high,” the RBA said Tuesday. “It will be some time before inflation is back to target rates.”

The blunt assessment came alongside a 10th consecutive rate hike in Australia. The move was expected.

Apparently, mounting recession concerns and household debt worries are now tipping the scales in favor of a pause, possibly as soon as next month. Although the bank still expects “further tightening will be needed to ensure inflation returns to target,” the new statement used the word “when” in addition to “how much further,” in the forward guidance. That was plainly aimed at giving Philip Lowe optionality.

Frankly, the allusion to a pause on Tuesday felt like another flipflop from Lowe. Back in December, in the color accompanying the bank’s eighth hike of the cycle, Lowe included language that the RBA wasn’t on a “pre-set course,” a nod to optionality. That language vanished from the February statement, only to be effectively reinstated a month later, just using different words.

“Well that was a surprise,” Prashant Newnaha, TD’s senior AsiaPac rates strategist, said, in an RBA recap aptly entitled “Spooked Within A Month.” “We did not expect the RBA to reframe its forward guidance so quickly,” TD wrote. “Just last month, the bank delivered a hawkish statement, and was firm in its signal, suggesting a string of successive rate hikes was likely on the cards.”

With allowances for the unprecedented nature of the circumstances, the RBA’s tightening campaign has been a confusing, messy affair. It began when the bank crashed out of an ill-fated experiment with yield-curve control in November of 2021, a fiasco that haunts Lowe to this day.

The market will never forgot that unfortunate episode, nor have traders forgotten that right up until the onset of hikes, Lowe was reluctant to countenance the idea of any tightening in 2022. For a time, he insisted rates would stay at rock-bottom levels until 2024. Although he wasn’t alone among central bankers in denying the reality of inflation, he was pretty adamant. And he held onto the dovish rhetoric for what certainly seemed like an inordinate amount of time even in the context of policymakers who were almost universally behind the curve.

“There is uncertainty around the timing and extent of the slowdown in household spending,” Lowe said Tuesday, noting that while “some households have substantial savings buffers,” others are currently suffering “a painful squeeze,” as higher interest rates collide which huge debt burdens, while elevated inflation erodes spending power.

Australian households are among the most indebted in the world. IMF data shows a household debt-to-GDP ratio of nearly 120%, and OECD figures suggest debt to disposable income has more than doubled over the past 25 years, from 97% in 1995 to 211% in 2021.

Underscoring the fragility of consumer sentiment, Westpac’s gauge jumped the most since April of 2021 in January, but at 84.3, the index still sat “in the bottom 10% of observations since the mid-1970s,” as Bill Evans wrote. “One likely explanation for the lift” in January was the absence of an RBA rate hike, Evans said. Of course, there was no RBA meeting in January, so if that was behind the jump in sentiment, it was reasonable to assume consumers’ mood would sour quickly, which is precisely what happened in February, when the same gauge tumbled almost 7% back near a record low. The RBA’s February hike which, as noted above, was accompanied by a statement most notable for what wasn’t there (i.e., the removal of key dovish language), came during the middle of the survey week.

It doesn’t help that home values are falling. Although prices rose in Sydney last month, February’s 0.3% increase was the first since January of last year, prior to the onset of RBA hikes. The outlook is very tenuous. “Considering the RBA’s move to a more hawkish stance at the February board meeting, along with an expectation for a weaker economic performance and a loosening in labor markets, there is a good chance this reprieve in the housing downturn could be short-lived,” Tim Lawless, research director of CoreLogic, said.

Note that Lawless described the February meeting as “more hawkish.” That underscores my point above about the extent to which Lowe’s messaging is consistently inconsistent. Last month’s hike was of the hawkish variety, and the forward guidance suggested there was no end in sight. This month’s hike was dovish and the forward guidance suggested a pause may be imminent.

“We also have the fixed-rate cliff ahead of us,” Lawless went on, in remarks published last week. “Arguably the full impact of the aggressive rate hiking cycle is yet to play out.” The median value of a home in Sydney last month was more than a million dollars.

In its latest financial stability report, published in October, the RBA analyzed the impact of a further 1% rise in rates through the end of this year that’s “fully passed through to variable-rate loan payments.” “Just over half of variable-rate owner-occupier borrowers would see their spare cash flows decline by more than 20% over the next couple of years, including around 15% of households whose spare cash flows would become negative as the combined burden of higher interest payments and the higher cost of essential goods and services exceeds their initial spare cash flows,” the RBA said.

Low-income, highly-indebted households “would likely be forced to draw down on their stocks of saving in order to continue to meet their loan payments and essential living expenses,” the report went on, noting that “some” of those households “may have a limited ability to do this.”

While it’s obviously true that rate hikes are a threat to indebted households, and as such the nod to a pause on Tuesday could be construed as helpful in that regard, I’d argue that what households really need is clarity. By contrast, Lowe’s hapless messaging risks creating additional uncertainty, which can feed into macro volatility.