MONETARY POLICY – AUSTRALIA

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

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

Rate pause could lure home buyers back

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Original article by Nila Sweeney
The Australian Financial Review – Page: 30 : 20-Mar-24

Tim Lawless of CoreLogic says the Reserve Bank of Australia’s decision to leave the cash rate unchanged on Tuesday is likely to boost the confidence of prospective home buyers. He notes that there has tended to be a close relationship between consumer sentiment and the volume of home sales. Meanwhile, SQM Research MD Louis Christopher expects mortgage stress to continue to rise while interest rates remain high, while the number of distressed listings is also likely to rise.

CORPORATES
CORELOGIC AUSTRALIA PTY LTD, SQM RESEARCH PTY LTD, RESERVE BANK OF AUSTRALIA

RBA keeps rate rise in reserve

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Original article by Michael Read
The Australian Financial Review – Page: 1 & 8 : 20-Mar-24

The Reserve Bank of Australia’s decision to leave the cash rate unchanged at 4.35 per cent on Tuesday had been widely expected. However, the RBA appears to have adopted a more neutral monetary policy stance in the statement it released after the two-day board meeting. It stated that the board is "not ruling anything in or out" with regard to the next interest rate move; in contrast, the RBA stated in February that a further increase in interest rates "cannot be ruled out". Financial markets have now fully priced in a 25 basis point reduction in the cash rate in September, as well as a strong chance of another rate cut in December.

CORPORATES
RESERVE BANK OF AUSTRALIA

Unemployment jumps to two-year high

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Original article by Patrick Commins
The Australian – Page: 5 : 16-Feb-24

Data from the Australian Bureau of Statistics shows that the nation’s official unemployment rate rose to 4.1 per cent in January, up from 3.9 per cent in December. The economy added just 500 jobs in January, and Bjorn Jarvis from the ABS says seasonal factors may have contributed to the larger-than-expected increase in the jobless rate. Treasurer Jim Chalmers says that although the labour market has been weakening, it remains very strong. Capital Economics economist Abhijit Surya in turn says the Reserve Bank is now likely to bring forward the first interest rate cut to around August rather than November.

CORPORATES
AUSTRALIAN BUREAU OF STATISTICS, AUSTRALIA. DEPT OF THE TREASURY, CAPITAL ECONOMICS LIMITED, RESERVE BANK OF AUSTRALIA

‘Job is not done’, says RBA boss

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Original article by Ronald Mizen
The Australian Financial Review – Page: 1 & 4 : 7-Feb-24

Investors have priced in a 41 per cent chance that the Reserve Bank of Australia will reduce the cash rate by June, compared with 53 per cent before the central bank left rates on hold at 4.35 per cent on Tuesday. RBA governor Michele Bullock says that while inflation fell to 4.1 per cent in the year to December, it remains too high for the central bank to begin easing monetary policy. She adds that the RBA will not begin doing so until it is confident inflation that will sustainably return to the target range of 2-3 per cent target; it does not expect this to happen until late 2025. Bullock also cautioned that further interest rate increases cannot be ruled out.

CORPORATES
RESERVE BANK OF AUSTRALIA

RBA rate cuts a double-edged sword for first-home buyers

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Original article by Matt Bell
The Australian – Page: 19 : 6-Feb-24

The Reserve Bank of Australia is widely tipped to leave the cash rate unchanged at 4.35 per cent on Tuesday. Sally Tindall of RateCity says the key focus will be on whether the central bank removes its tightening bias. Meanwhile, money markets now expect the RBA to reduce the cash rate by 25 per cent in both August and November. Ray White’s chief economist Nerida Conisbee notes that interest rate cuts will increase the borrowing power of first home buyers, but can also be expected to further boost house prices.

CORPORATES
RESERVE BANK OF AUSTRALIA, RATECITY PTY LTD, RAY WHITE GROUP

Investors caution markets still too bullish on rates

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Original article by Cecile Lefort
The Australian Financial Review – Page: 21 : 24-Jan-24

Financial markets have scaled back their expectations of interest rate cuts from the Reserve Bank of Australia in 2024; the RBA is now expected to reduce the cash rate by 37 basis points over the year, compared with expectations of a 55 basis point cut earlier in January. Tim Van Klaveren of UBS expects two rate cuts in 2024, while Matt Wacher from Morningstar anticipates three rate cuts in response to an economy that he expects to slow quickly. Meanwhile, financial markets have now fully priced in a US interest rate cut in June.

CORPORATES
RESERVE BANK OF AUSTRALIA, UBS HOLDINGS PTY LTD, MORNINGSTAR PTY LTD

Economists warn of unintended fallout from RBA overhaul

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Original article by Cecile Lefort
The Australian Financial Review – Page: 21 : 17-Jan-24

Economists polled by The Australian Financial Review have expressed some reservations with regard to how the Reserve Bank will communicate monetary policy decisions under its new structure. The RBA’s mew Monetary Policy Board will be responsible for setting interest rates; it will publish details of how the board voted on rate decisions, but not the voting records of each board member. Economists contend amongst other things that not diclosing these votes could potentially give rise to speculation of dissension amongst board members when this does not exist.

CORPORATES
RESERVE BANK OF AUSTRALIA

Jobless rate fears halt RBA rate increases

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Original article by Patrick Commins
The Australian – Page: 2 : 20-Dec-23

The minutes of the Reserve Bank of Australia’s board meeting for December show that it considered whether to increase the cash rate for a second successive month. The board noted the possibility that the unemployment rate could rise higher than originally anticipated due to the central bank’s push to rein in the inflation rate. The board reiterated that it will do whatever is necessary to return inflation to its target range within a reasonable timeframe. Gareth Aird from the Commonwealth Bank expects three official interest rate cuts in 2024, beginning in September.

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