RBA review: exploring the possibility of interest rate hikes within this year
2023-09-07
■The RBA (Reserve Bank of Australia) has maintained its policy interest rate at 4.10% in three consecutive meetings, expressing concerns about China's economic slowdown.
■ Considering the economic support measures of the Chinese government and Australia's price index, there is a possibility of further interest rate hikes in November or December.
On May 5th, the Reserve Bank of Australia (RBA) maintained its policy interest rate at 4.10%. This is the third consecutive time since July that it has remained unchanged. In order to curb inflation, the policy interest rate has been raised by 400 basis points since May last year, reaching its highest level in 11 years. Although this meeting is the last for current RBA Governor Lowe, the statement basically continues the content of August. The statement did not rule out the possibility of further interest rate hikes, indicating that further monetary policy tightening may be necessary, depending on data and risk assessment, with special attention to world economic trends, personal consumption trends, prices, and labor market prospects. In addition, a new sentence has been added, mentioning that due to the tense situation in the real estate market, the prospects for China's economy have become uncertain.
Today, the Australian Bureau of Statistics announced a year-on-year growth of 0.4% in real GDP in the second quarter, which has accelerated from the previous quarter (an increase of 0.2%). Although personal consumption has weakened due to inflation and rising interest rates, investment (including public and private investment) and exports continue to support growth. At present, it is worth noting that due to the warm winter in the northern hemisphere, European coal and liquefied natural gas inventories are at high levels, and the deteriorating trade conditions caused by the declining demand for iron ore in China's construction and manufacturing industries will improve again. In addition, with the increase of the minimum wage, the downward trend of household savings rate may be curbed, and further observation is needed to determine whether it will promote the recovery of personal consumption. Although the slowdown in China's economic growth may pose a constraint on the Australian economy, if the Chinese government's stimulus policies can activate infrastructure investment, exports to China, including iron ore and coal, are expected to increase.
In the short-term financial market, it is widely believed that the board of directors will continue to maintain the policy interest rate at 4.1% in October, but for November and December, the market generally expects a further rate hike of 0.25%, with a probability of around 25%. Although the year-on-year growth rate of the Consumer Price Index (CPI) slowed to 6.0% in the second quarter, the growth rate of the salary index remained at a relatively high level of 3.6%. The market generally believes that interest rate hikes may be suspended, but it is necessary to wait for the release of the third-quarter consumer price index in late October and the salary index in mid-November to explore the possibility of further interest rate hikes this year.
■ Considering the economic support measures of the Chinese government and Australia's price index, there is a possibility of further interest rate hikes in November or December.
On May 5th, the Reserve Bank of Australia (RBA) maintained its policy interest rate at 4.10%. This is the third consecutive time since July that it has remained unchanged. In order to curb inflation, the policy interest rate has been raised by 400 basis points since May last year, reaching its highest level in 11 years. Although this meeting is the last for current RBA Governor Lowe, the statement basically continues the content of August. The statement did not rule out the possibility of further interest rate hikes, indicating that further monetary policy tightening may be necessary, depending on data and risk assessment, with special attention to world economic trends, personal consumption trends, prices, and labor market prospects. In addition, a new sentence has been added, mentioning that due to the tense situation in the real estate market, the prospects for China's economy have become uncertain.
Today, the Australian Bureau of Statistics announced a year-on-year growth of 0.4% in real GDP in the second quarter, which has accelerated from the previous quarter (an increase of 0.2%). Although personal consumption has weakened due to inflation and rising interest rates, investment (including public and private investment) and exports continue to support growth. At present, it is worth noting that due to the warm winter in the northern hemisphere, European coal and liquefied natural gas inventories are at high levels, and the deteriorating trade conditions caused by the declining demand for iron ore in China's construction and manufacturing industries will improve again. In addition, with the increase of the minimum wage, the downward trend of household savings rate may be curbed, and further observation is needed to determine whether it will promote the recovery of personal consumption. Although the slowdown in China's economic growth may pose a constraint on the Australian economy, if the Chinese government's stimulus policies can activate infrastructure investment, exports to China, including iron ore and coal, are expected to increase.
In the short-term financial market, it is widely believed that the board of directors will continue to maintain the policy interest rate at 4.1% in October, but for November and December, the market generally expects a further rate hike of 0.25%, with a probability of around 25%. Although the year-on-year growth rate of the Consumer Price Index (CPI) slowed to 6.0% in the second quarter, the growth rate of the salary index remained at a relatively high level of 3.6%. The market generally believes that interest rate hikes may be suspended, but it is necessary to wait for the release of the third-quarter consumer price index in late October and the salary index in mid-November to explore the possibility of further interest rate hikes this year.