GENERAL NEWS
THE Reserve Bank is more likely to hike interest rates than not in the wake of last week’s inflation data, according to Capital Economics, which has cautioned that...
Capital Economics Australia and New Zealand economist Abhijit Surya said in a note the Australian Bureau of Statistics’ release of consumer price index (CPI) data...
“With price pressures proving more stubborn than most had anticipated, markets have now given up any hopes that the RBA will cut rates this year,” Surya said in the note...
“While we agree that policy loosening is a distant prospect, we think investors are under-pricing the likelihood of a rate hike. Given the material upside surprise in...
The Reserve Bank held interest rates again at 4.35% at its last meeting on the back of more favourable inflation and economic data that suggested its 13 rate hikes since...
Surya outlined four factors underpinning the firm’s view, saying that inflationary pressures are stronger than the RBA had anticipated just two months ago...
“In order for trimmed mean inflation to fall in line with the RBA’s forecast for Q2, trimmed mean CPI would have to rise by just 0.6% quarter-on-quarter this quarter...
“Second, the RBA has long been vocal about its concerns regarding the potential for services inflation to prove sticky. That unease will only have deepened following the...
“Third, the labour market has continued to fire on all cylinders. The unemployment rate has largely moved sideways over the past six months.” Currently at 3.9%, Surya said...
“Although the PMI numbers haven’t always been a reliable guide to the hard data, they nonetheless suggest upside risks to the RBA’s forecast for growth of just 1.3% this quarter.”...
Following the release of the data, Westpac economists pushed out the timing of a rate cut to November 2024, in line with the current forecasts from NAB and ANZ...
“With monetary policy typically having its largest impact in a year and a bit after a cash rate change, we have not yet seen the economic data prints that encompass the...
“Balanced against that are the upcoming Stage 3 tax cuts…Without the tax cuts, we would see GDP growth of around 1.25% this year and consumer sentiment stuck in...
“And even with the tax cuts, policy is still on the restrictive side of neutral. Unless, that is, you think that the neutral nominal rate is at or above 4%. Given the...