K62 Finance

Rate rise still priced in despite Chalmers’ forecast

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Original article by Alex Gluyas
The Australian Financial Review – Page: 28 : 14-May-24

AMP’s chief economist Shane Oliver is amongst those who have questioned the federal government’s forecast that the headline inflation rate will fall to 3.5 per cent by the end of June. He notes that it is uncertain as to how cost-of-living relief in the budget will impact on inflation, given that the financial year ends in about six weeks. Paul Bloxham of HSBC in turn says the budget is likely to boost the Reserve Bank’s preferred measure of core inflation, which is likely to rule out an interest rate cut in 2024. Meanwhile, futures traders still expect the central bank to increase the cash rate this year.

CORPORATES
AMP LIMITED – ASX AMP, HSBC HOLDINGS PLC, RESERVE BANK OF AUSTRALIA

CBA tips one rate cut this year as fears of a rise ease

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Original article by Cecile Lefort, Joshua Peach
The Australian Financial Review – Page: 25 : 1-May-24

Financial market traders have now priced in a 25 per cent chance that the Reserve Bank of Australia will increase the cash rate by September; this compares with a 47 per cent chance on Monday. Meanwhile, the Commonwealth Bank now expects the cash rate to be reduced by 25 basis points to 4.1 per cent in November, having previously forecast three interest rate cuts in 2024. It also anticipates four interest rate cuts in 2025. The revised interest rate outlook follows last week’s release of data showing that inflation grew by a higher than expected one per cent for the March quarter; however, it preceded the release of data showing a decline in retail sales in March.

CORPORATES
RESERVE BANK OF AUSTRALIA, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA

RBA’s next move will still be a cut: investors

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Original article by Cecile Lefort
The Australian Financial Review – Page: 29 : 30-Apr-24

The US Federal Reserve is now widely tipped to deliver its first interest rate cut in December, after the latest inflation data dampened expectations of a rate cut in June. Meanwhile, bond traders have now priced in a 50 per cent chance that the Reserve Bank of Australia will increase the cash rate to 4.6 per cent by September. Both central banks are expected to leave interest rates unchanged at their upcoming board meetings. Kapstream Capital portfolio manager Kris Bernie still expects the RBA to reduce the cash rate, although he says this is now likely to be delayed until 2025.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF AUSTRALIA, KAPSTREAM CAPITAL PTY LTD

Mortgage stress declined in March as household incomes increased and the RBA left interest rates unchanged

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Original article by Roy Morgan
Market Research Update – Page: Online : 24-Apr-24

New research from Roy Morgan shows that 1,531,000 mortgage holders (30.3%) were ‘At Risk’ of ‘mortgage stress’ in the three months to March 2024. This was a fall of 98,000 (-1.1%) on a month earlier, after the RBA elected to leave interest rates unchanged for the third straight meeting. The level of mortgage stress in March is the lowest so far this year; this month’s decline has been driven by rising household incomes, which has reduced the financial pressure on some mortgage holders. The proportion of mortgage holders now ‘At Risk’ is well below the record high of 35.6% reached during the Global Financial Crisis because of the larger size of the Australian mortgage market today. However, the number of Australians ‘At Risk’ of mortgage stress has increased by 724,000 since May 2022 when the RBA began a cycle of interest rate increases. Meanwhile, the number of mortgage holders considered ‘Extremely At Risk’ of mortgage stress, is now numbered at 918,000 (18.7% of mortgage holders), which is significantly above the long-term average over the last 10 years of 14.4%. These are the latest findings from Roy Morgan’s Single Source Survey, based on in-depth interviews conducted with over 60,000 Australians each year, including over 10,000 owner-occupied mortgage-holders.

CORPORATES
ROY MORGAN LIMITED

‘Can’t rule out a further rate rise’: economists survey reveals caution

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Original article by Cecile Lefort
The Australian Financial Review – Page: 29 : 23-Apr-24

The consensus of economists polled by the Australian Financial Review is that the Reserve Bank will reduce the cash rate in November. However, financial market pricing suggests that the central bank will leave official interest rates unchanged for the rest of the year. Meanwhile, Ben Picton from Rabobank says another interest rate increase remains a possibility if inflation begins to accelerate. CPI data for the March quarter will be released on Wednesday.

CORPORATES
RESERVE BANK OF AUSTRALIA, RABOBANK AUSTRALIA LIMITED

Reserve Bank could end up cutting rates before the Fed

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Original article by Cecile Lefort
The Australian Financial Review – Page: 28 : 16-Apr-24

The US Federal Reserve has traditionally been the first central bank to cut interest rates when a monetary policy easing cycle begins. However, other countries have experienced a sharper slowdown in economic growth and inflation than the US; this has heightened expectations that the Federal Reserve will leave the cash rate on hold for longer than forecast. Some economists now expect the Fed to delay a rate cut until December, while there has also been speculation about another rate rise. Meanwhile, AMP says the Reserve Bank of Australia could potentially reduce official interest rates in June.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF AUSTRALIA, AMP LIMITED – ASX AMP

Rate cut hopes dashed by US data

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Original article by Cecile Lefort
The Australian Financial Review – Page: 23 : 12-Apr-24

Financial markets have now priced in a 20 per cent chance that the US Federal Reserve will reduce the cash rate in June, compared with 58 per cent prior to the release of the latest inflation data. The figures showed that the inflation rate remains well above the central bank’s target of two per cent; core inflation rose by 0.4 per cent in March and 3.8 per cent in the year to March. Financial markets now expect just one rate cut in 2024. The US inflation data has also prompted Australian investors to scale back their expectations regarding the timing of monetary policy easing by the Reserve Bank.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF AUSTRALIA

CBA skimps on interest, makes an extra $1.7b

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Original article by James Eyers
The Australian Financial Review – Page: 12 : 10-Apr-24

The Commonwealth Bank of Australia disclosed in its half-year financial results that it held $825bn worth of deposits in December, including $284bn in savings accounts. Victor German from Macquarie believes that unlike rival banks, a higher proportion of CBA customers use higher-margin online saving accounts rather than bonus saver accounts. Online accounts initially pay a higher interest rate, but the ongoing base rate is typically much lower than the rates offered with bonus saver accounts. German contends that this allows CBA to pay out relatively less interest to customers, which boosts its net interest margin and adds about $1.7bn to its annual profit.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, MACQUARIE GROUP LIMITED – ASX MQG

Doubt builds RBA will cut rates in 2024

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Original article by Cecile Lefort
The Australian Financial Review – Page: 27 : 9-Apr-24

Financial markets are now pricing in two interest rate cuts in the US during 2024, while the Federal Reserve has previously flagged the likelihood of three rate cuts. The latest US non-farm payrolls data has strengthened the case for a rate cut to be delayed until later in the year, with the economy adding a higher-than-expected 303,000 jobs in March. There are heightened expectations that the Reserve Bank of Australia will also delay the timing of its first rate rise, with growing speculation that the central bank will leave the cash rate on hold until 2025.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF AUSTRALIA

Banks ramp up plans for potential cash disruption

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Original article by James Eyers
The Australian Financial Review – Page: 17 : 3-Apr-24

Australia’s major banks and retailers are preparing contingency plans to ensure that cash deliveries will continue in the event that Armaguard collapses. The Australian Competition & Consumer Commission has authorised the banks and retailers to co-operate in maintaining the continuity of cash transit services amid ongoing concern about Armaguard’s viability. The banks have also warned that government intervention may be necessary if Armaguard collapses.

CORPORATES
ARMAGUARD, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION