The AFR appears short of stories today so has opted for interest rate scaremongering instead:
The US Federal Reserve held its nerve and raised interest rates in the face of global banking system instability, paving the way for the Reserve Bank to deliver an 11th straight increase to Australia’s cash rate next month as central banks resume their battle against inflation.
…“Central banks can walk and chew gum – they have other tools to deal with liquidity shortages, but reining in inflation still remains the primary goal,” BIS Oxford Economics head of macroeconomic forecasting Sean Langcake said.
“If the ECB and Fed have decided their markets can weather a rate hike, it would be very odd for the RBA to reach a different conclusion,” he said, referring to the European Central Bank’s half a percentage point rate increase last week.
“Especially after the assurances they gave earlier this week on the strength of Australian banks,” he said.
Yawn. The RBA is likely to hold. The Fed is an afterthought for it:
- The banking crisis is not resolved.
- The local economy is much weaker than the US.
- Wage growth is disappearing faster than you can say “immigration”.
Sure, greedflation is still at a high number so the only thing that will concern the RBA at this point is house prices, which have suddenly begun to rebound.
But even that is not much of a concern from its viewpoint amid a global CRE shock and rising bank funding costs.
Futures markets have priced the current cash rate as the peak with two cuts to come over 18 months:
My view is the only thing futures have wrong is the number of cuts will be more like 6 to 8.
