The Reserve Bank of Australia hikes the cash rate and its inflation forecasts, so the Australian dollar rises in response. New Zealand jobs data today is being watched closely by the RBNZ. Gold and silver prices surge again.
In our Deep-Dive interview, ANZ Economist Maddy Dunk says Australia’s housing market was starting to soften ahead of the RBA hiking rates, particularly in Sydney and Melbourne.
5 things to know in 5 minutes:
The Reserve Bank of Australia yesterday hiked the cash rate 25 basis points to 3.85% - as expected, but still only within months of the market expecting rate cuts. Inflation forecasts were lifted, and the Australian dollar rose. ANZ Head of Australian Economics Adam Boyton says the RBA indicated there is potentially too much demand in the economy relative to supply.
Adam says the RBA’s higher inflation forecasts gave the Statement on Monetary Policy a more hawkish tone than expected. His view though, is the risks are skewed to slightly lower inflation outcomes through the year than the RBA expects, which should see rates stay on hold from here.
The rate hike was expected by consumers. The ANZ Roy Morgan Australian Consumer Confidence index fell 3.5 points last week to 80.5 following stronger than expected Q4 inflation data, says ANZ Economist Sophia Angala.
In New Zealand today, Q4 labour market data will be watched closely as the market looks for reasons to bring forward rate hike expectations. ANZ New Zealand Chief Economist Sharon Zollner is expecting the unemployment rate to stay at 5.3%, employment growth of 0.3% and a larger working age population.
The US and India announced a deal to lower US tariffs on Indian products yesterday after multiple rounds of negotiations. ANZ Economist Dhiraj Nim says the reduction from 50% - which included a 25% penal rate - to 18%, provides upside risk to growth.
Cheers,
Bernard.
Catch you tomorrow with analysis of New Zealand’s Q4 labour market data and whether that affects expectations for when the Reserve Bank of New Zealand might hike.
