Tuesday: RBA set to pause as China slows

RBA set for monthly cash rate decision at 2.30pm AEST; ANZ sees RBA holding again at 4.1%; China flash PMI for services weaker than expected; New stimulus measures announced; EU soft-ish landing

ANZ’s economists see the RBA pausing the cash rate again at 4.1% today. China’s services sector was slower than expected in July as consumers hoarded cash. The Bank of Japan finally tightened policy a bit without causing market ructions. Europe’s economy appears headed for a soft landing.

In our deep dive interview, we talk with ANZ’s Head of Australian Economics Adam Boyton about why the RBA can afford to hold and wait for more data, even though inflation is still 6%.

The 5 things you need to know

1. The Reserve Bank of Australia’s monthly monetary policy decision is due at 2.30pm AEST. Some economists see a hike. ANZ’s economists expect a second pause and the cash rate being on hold until late next year.

2. China announced new stimulus measures overnight to encourage consumer spending, which stock markets in Shanghai and Hong Kong have been enthused about in recent days. ANZ’s Chief Economist for Greater China Raymond Yeung thinks that enthusiasm may not be justified.

3. The Bank of Japan tightened monetary policy a bit on Friday, surprising most who had waited in vain for months for some sort of move to control rising inflation. The small pivot was executed without too much market drama.

4. Euro zone GDP grew 0.3% in the June quarter, which was a touch above forecasts. The flash measures of Euro zone inflation were also relatively benign, encouraging those who expect the ECB to now pause its rate hikes.

5. ANZ’s monthly survey of NZ businesses in July showed a mixed outlook for both growth and inflation.

Have a great day.

Cheers

Bernard