Economic news

Australia holds rates steady, might be done tightening

2023.08.01 02:34


© Reuters. FILE PHOTO: A businessman walks past the headquarters of Australia’s Reserve Bank in Sydney, November 3, 2015. . REUTERS/Jason Reed

SYDNEY (Reuters) – Australia’s central bank on Tuesday held interest rates at 4.1% for a second straight month, saying past increases were working to cool demand, but retained a warning that some more tightening might be needed to curb inflation.

Wrapping up its August policy meeting, the Reserve Bank of Australia (RBA) largely left its economic forecasts unchanged from the previous quarter, forecasting headline inflation would return to within its 2-3% target range by late 2025.

Markets had leaned toward a steady outcome given recent data showed inflation had eased for a second quarter and consumer spending was softening.[AU/INT]

The Australian dollar extended earlier declines to be 0.9% lower at $0.6660, three-year bond futures rose 8 ticks to 96.22, and futures pared back the risk of another hike this year, suspecting that RBA’s tightening this cycle could be over now.

Governor Philip Lowe reiterated that higher interest rates were working to cool demand, and will continue to do so, and the pause this month would provide time to assess the impact of the a 400 basis point jump in rates.

“In aggregate, consumption growth has slowed substantially due to the combination of cost-of-living pressures and higher interest rates,” said Lowe, whose term will end in September.

In a relief to policymakers, headline inflation slowed more than expected in the second quarter, while retail sales posted their biggest fall this year in June.

However, services inflation, including surging rents, is likely to be sticky, the labour market has defied expectations for a slowdown with the jobless rate staying near 50-year lows at 3.5%, and housing prices continued to climb in July, a positive wealth effect for consumers.

“The longer the RBA leave it, the worse the coincident economic data appears and the harder it is for them to raise rates to tackle inflation,” said Emma Lawson, a fixed interest strategist at Janus Henderson.

“We remain in the midst of the peaking of the economy but believe that policy will continue to grip and slow economic growth, with a shallow recession starting early next year not off the table.”

Indeed, economic growth is expected to slow to 1.75% next year and average a little above 2% in 2025.

Governor Lowe also removed any reference to the “narrow path”, a result that policymakers will bring inflation down without incurring mass unemployment.

“To be sure, the Bank continued to state that some further tightening of monetary policy may be required,” said Marcel Thieliant, head of Asia Pacific at Capital Economics, who predicted a peak rate of 4.6%.

“However, barring any new inflationary shocks, there’s a good chance the RBA is done tightening altogether.”

Source link

Related Articles

Back to top button
bitcoin
Bitcoin (BTC) $ 99,164.57 1.81%
ethereum
Ethereum (ETH) $ 3,481.59 0.79%
tether
Tether (USDT) $ 0.999953 0.10%
xrp
XRP (XRP) $ 2.31 0.37%
bnb
BNB (BNB) $ 704.34 2.07%
solana
Solana (SOL) $ 199.69 2.69%
dogecoin
Dogecoin (DOGE) $ 0.333702 0.92%
usd-coin
USDC (USDC) $ 1.00 0.20%
staked-ether
Lido Staked Ether (STETH) $ 3,474.24 0.72%
cardano
Cardano (ADA) $ 0.918023 0.52%
tron
TRON (TRX) $ 0.258014 1.00%
avalanche-2
Avalanche (AVAX) $ 40.67 0.20%
chainlink
Chainlink (LINK) $ 24.72 0.72%
the-open-network
Toncoin (TON) $ 5.99 4.93%
wrapped-steth
Wrapped stETH (WSTETH) $ 4,129.31 1.15%
shiba-inu
Shiba Inu (SHIB) $ 0.000023 0.54%
sui
Sui (SUI) $ 4.59 0.14%
wrapped-bitcoin
Wrapped Bitcoin (WBTC) $ 98,883.49 1.76%
hedera-hashgraph
Hedera (HBAR) $ 0.314991 2.74%
stellar
Stellar (XLM) $ 0.386553 3.05%
polkadot
Polkadot (DOT) $ 7.53 1.38%
weth
WETH (WETH) $ 3,483.73 0.85%
hyperliquid
Hyperliquid (HYPE) $ 28.21 2.65%
bitcoin-cash
Bitcoin Cash (BCH) $ 461.87 1.14%
leo-token
LEO Token (LEO) $ 9.50 0.65%
uniswap
Uniswap (UNI) $ 13.89 3.91%
litecoin
Litecoin (LTC) $ 109.43 1.38%
bitget-token
Bitget Token (BGB) $ 5.73 15.99%
pepe
Pepe (PEPE) $ 0.000019 1.47%
wrapped-eeth
Wrapped eETH (WEETH) $ 3,674.85 0.92%
near
NEAR Protocol (NEAR) $ 5.46 0.38%
ethena-usde
Ethena USDe (USDE) $ 1.00 0.24%
aave
Aave (AAVE) $ 371.53 1.28%
aptos
Aptos (APT) $ 9.68 0.80%
usds
USDS (USDS) $ 1.00 0.09%
internet-computer
Internet Computer (ICP) $ 11.27 2.01%
polygon-ecosystem-token
POL (ex-MATIC) (POL) $ 0.518815 0.16%
crypto-com-chain
Cronos (CRO) $ 0.158675 4.01%
vechain
VeChain (VET) $ 0.052064 0.01%
mantle
Mantle (MNT) $ 1.25 1.85%
ethereum-classic
Ethereum Classic (ETC) $ 27.36 1.79%
render-token
Render (RENDER) $ 7.59 1.19%
bittensor
Bittensor (TAO) $ 502.92 2.58%
monero
Monero (XMR) $ 197.93 3.69%
mantra-dao
MANTRA (OM) $ 3.79 1.21%
whitebit
WhiteBIT Coin (WBT) $ 24.96 0.54%
fetch-ai
Artificial Superintelligence Alliance (FET) $ 1.36 0.73%
dai
Dai (DAI) $ 1.00 0.19%
arbitrum
Arbitrum (ARB) $ 0.804391 0.46%
filecoin
Filecoin (FIL) $ 5.33 1.12%