Australian interest rates

By Leith van Onselen Last week I posted a detailed analysis debunking the view that falling interest rates are a “gift” to Australia’s younger generations because they make housing “more affordable”.

From Westpac chief economist, Bill Evans: August RBA Statement on Monetary Policy – as expected, forecasts unchanged but commentary indicates that the Bank retains an easing bias. In its Statement on Monetary Policy (SoMP) for August the Reserve Bank has made no significant changes to its forecasts.

By Leith van Onselen The AFR’s Jacob Greber posted an interesting article yesterday afternoon claiming that the cut to interest rates is Generation X’s & Y’s “revenge” over the baby boomers: It’s officially time for Gen X and Gen Y to ease up on the Baby Boomer hate.

By Leith van Onselen The OECD’s Dr Adrian Blundell-Wignall has provided a sensible assessment of the RBA’s decision to cut interest rates, arguing that it had little choice as Australia is caught in the global currency war.

From the AFR: Prime Minister Malcolm Turnbull has demanded big banks pass on the full rate cut from Tuesday and if not, explain why, or risk exposing themselves further to calls for a Royal Commission.

From Morgan Stanley: The major banks have responded to the RBA’s 25bp rate cut by: (1) re-pricing home loan standard variable rates (SVRs) by ~12-15bp; (2) increasing rates for >1yr term deposits (TDs) by 45-75bp (although NAB raised 8-month TD rates by 85bp); (3) re-pricing business SVRs by 12-15bp.

Recall Peter Martin from a few days ago: Apparent strong house price growth in Sydney and Melbourne is unlikely to dissuade the Reserve Bank from cutting interest rates on Tuesday, in part because it’s not what it seems.

From Banking Day: Yesterday the board of the Reserve Bank of Australia confirmed what had become a widely expected decision – to shave another 25 basis points off the official cash rate, taking it to an unprecedented low point of 1.50 per cent.

From Bill Evans today: As expected the Board of the Reserve Bank decided to lower the cash rate by 25bps to 1.5% at its August Board meeting.

Meanwhile, CBA has also raised term deposit rates, suggesting it may be experiencing some funding issues or regulatory action.

Aussie bond yields just hit record low yields on the two year and five year.

The RBA meet is done and it has cut rates to 1.5%.

The AFR’s Phil Baker reckons the RBA should cut by 50bps today: If the Reserve Bank really wants business to change its behaviour and start investing then maybe the central bank should think about cutting by 50 basis points when they meet on Tuesday to discuss the correct setting of interest rates.

From the Melbourne Institute, monthly inflation for July is in at -0.3% and 1% year on year: Trimmed mean unchanged at 1.4%.

Australia’s two media RBA bellwethers are signaling a rate is go.

What a bull market it is.

APRA has released its June banking statistics and the mystery of why house prices are still rising at all deepens as investor lending continues to slow well below APRA’s macroprudential thresholds.

Professor McKibbin is certainly holding the line, from the AFR: Former Reserve Bank of Australia board member Warwick McKibbin has urged the central bank to ignore “market hysteria” over the weakest inflation figures since 1999, warning that adopting the zero-rate policies of Japan and Europe won’t fix the economy.

From Richard Koo of Nomura on dropping money from helicopters: 1.

CBA: There was really only one question to answer from today’s CPI numbers: Is inflation low enough to justify market pricing and economist’s expectations for an August rate cut?

Australia’s primary inflation driver is always non-tradable: And guess what drives it?

By Leith van Onselen As noted earlier in brief, the Australian Bureau of Statistics (ABS) has released the Consumer Price Index (CPI) data for the June quarter 0f 2016, which registered another soft reading for headline inflation, with underlying inflation also remaining well in check.

From BofAML: Our skepticism around the ‘yield chase’ narrative is driven by the dissonance between yields offered by various assets and realised returns since that time.