So, interest rates have finally been cut in Australia. Once again, our central bank took longer than most expected to ease financial conditions for Australian borrowers, but with every decision, there are winners and losers.
Why Powell went for a double-dip on the guide rate at the world’s most important reserve bank, sans the presence of a significant economic event that would typically predicate it, remains a mystery. What is clear, though, is the near-term direction of rates in US.
A data dependent Fed will eventually need to acknowledge signs of a strengthening global economy, says Neuberger Berman. Bolts of information that sway the central bank will continue to keep market watchers on tenterhooks.
The rate hiking cycle may be reaching its zenith, with inflation showing signs of a plateau. The next few months will be pivotal, Neuberger Berman says, which means accounting for two-way risk is crucial.
In a recent market update Sage lamented the RBA’s recent decision to re-engage interest rake hikes after pausing only a month earlier. Policy outcomes have become confusing, the fund manager noted, with the path to a soft landing becoming even narrower.
The RBA will either take the road that equity markets are pricing in, and try to nail a smooth landing, or follow the road that bond markets anticipate and re-raise interest rates, according to Atrium’s Brendan Paul.
The average annual interest rate on banks’ one- and three- year term deposits has risen to 3.2 per cent from 0.25 per cent over the past year. With markets expecting the official cash rate to peak soon, savers looking to lock in attractive rates will find the best deals with smaller, newer banks, analysts say.
The Reserve Bank of Australia is sticking to its view that inflation will be temporary, despite its poor forecasting track record. Economists aren’t so sure.
In its latest quarterly statement on monetary policy, the Reserve Bank of Australia declared its preparedness to “ease monetary policy further if needed”.
